Flex Industries Ltd vs Cce, Lucknow on 2 July, 2013

[Cites 39, Cited by 8]

Custom, Excise & Service Tax Tribunal

Flex Industries Ltd vs Cce, Lucknow on 2 July, 2013

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,

WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.

DIVISION BENCH

COURT No.3

Excise Appeal No.E/1332-1338, 1471-1473, 1540-1548,1501-1502/07

1555-1556, 1562, 1580-1581, 1716- 1720, 1855, 1867,2232,2306,2308 of 2007 and E/3081/2010

(Arising out of Order-in-Original No.07-09/Commissioner/LKO/2006-07 dated 30.01.2007 passed by CCE, Lucknow)

Date of Hearing: 15.03.2013

Date of Decision: 02.07.2013

Honble Mrs.Archana Wadhwa, Member (Judicial)

Honble Mr.Sahab Singh, Member (Technical)

1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3
Whether Their Lordships wish to see the fair copy of the Order?

4
Whether Order is to be circulated to the Departmental authorities?

Flex Industries Ltd. Appellants

Rajeev Sharma, Divisional Manager

A.P.Singh, Senior Manager

Anil Sharma, Assistant General Manager

Ashok Chaturvdi, Managing Director

Pitambar Freight Carriers

Balkishan Sahu

Madhur Mohan

Surindra kumar Sethi

Jitendra Kumar Gupta, Proprietor

Harsinghar Gutkha Pvt.Ltd.

Mahesh Singh Patel

Amit Srivastava

Rajni Singh Proprietor

Rajnesh Tewari

Smt.Anju Singh Prop. of Anju Agencies

Sudhir Chand Gupta

Ashish Kumar Mishra

K.N.Singh

Raja Ram Gupta, Sole Prop.

Anjani Kumar

Rama Shankar

Ajay Pandey

Om Narain Singh, Prop.of Patel Bros

R.k.Agarwal (Finance Manager)

The Indian Wood Products Co. Ltd.

Shri Ambbrish Kumar Chaurasia, Direcor

A.V.S.Rotopac Pvt.Ltd.

Ram Pal Jaiswal

Ramesh Chand Jaiswal, Prop.

Kamal Kumar, Prop.

Deepak Kumar, Prop. Deepak Agencies

Shiv Kumar Agarwal, Prop. Agarwal Traders

Amitesh Chaurasia, Shri Ram Trading Co.

Awadh Wood Product

Rajendra Kumar Maheshwari, Partner

Smt.Sumitra Agarwal, Prop.

Vs.

CCE, Lucknow Respondent

Present for the Appellant: Shri K.K.Anand, Advocate

Present for the Respondent: Shri Mohan Prasaran, ASG

Present for the Respondent: Shri Meyyappan, Advocate

Coram: Honble Mrs.Archana Wadhwa, Member (Judicial)

Honble Mr.Sahab Singh, Member (Technical)

FINAL ORDER NO.56841-56875/2013

PER: ARCHANA WADHWA

All the appeals are being disposed of by a common order as they arise out of same impugned order passed by the Commissioner, vide which he has decided 3 different show cause notices issued to various parties. The details of 3 show cause notices and resultant confirmation of demand of duties and imposition of penalties are as under:-

1.Show Cause Notice dt.31.01.2003

S.No.
Name of the party
Confirmation of duty
Imposition of penalty
1
M/s.HSG
Rs.1,37,63,64,467/-
Rs.1,37,63,64,467/
2
Mahesh Singh, MD of M/s.HSG
-

Rs.10,00,00,000/-

Mahesh Singh of M/s.Mahesh & Co.

Rs.2,50,00,000/-

K.N.Singh

Rs.1,00,00,000/-

Amit Srivastava, Accounts Assistant of M/s.HSG

Rs.10,00,000/-

Smt.Anju Singh, Proprietor of M/s.Anju Agencies

Rs.5,00,00,000/-

Om Narain Singh, Proprietor of M/s.Patel Brothers

Rs.5,00,00,000/-

Jayant Misra Alias Rajan, C/o M/s.

Patel Brothers

Rs.15,00,000/-

Rajnish Tewari, Manager of M/s.Anju Aagencies

Rs.20,00,000/-

Anjani Kumar, Computer Operator of M/s.

Mahesh & Co.

Rs.3,00,000/-

Ms.Rajni Singh, Prop.M/s.Gopal Grinding Industries

Rs.2,00,00,000/-

Ashish Kumar Misra, Supervisor of M/s.Gopal Grinding industries

Rs.5,00,000/-

Ajay Pandey,Manager of M/s.Gopal Grinding industries

Rs.10,00,000/-

Shiv Kishore, Prop. M/s.Pappu Salesman

Rs.1,00,000/-

Sudhir Chand Gupta, Prop.M/s.Sudhir Chand Gupta

Rs.15,00,000/-

Shiv Kumar Agarwal, Prop.M/s.Agarwal Traders

Rs.7,00,000/-

Smt.Sumitra Agarwal, Prop. M/s.Agarwal Zard Store

Rs.7,00,000/-

Kamal Kumar Jain Prop. M/s.Jain Agencies

Rs.3,00,000/-

Surendra Kumar Sethi,Prop.M/s.S.K Traders

Rs.3,00,000/-

Jitendra Kumar Gupta,Prop.M/s.

Omar Agencies

Rs.1,00,000/-

Amitesh Chaurasia, Prop.

M/s.Shri Ram Trading Co.

Rs.5,00,000/-

Ramesh Chand Jaiswal, Prop.M/s.Jaiswal Strore

Rs.3,00,000/-

Raja Ram Gupta, Prop. M/s.Gupta Trading Co.

Rs.3,00,000/-

Madhur Mohan Prop. M/s.Madhur Mohan Arjun Kumar

Rs.1,00,000/-

Mukesh Kumar Kandelwal, Prop.

M/s.Bareilly Kirana Stores

Rs.1,00,000/-

Rama Shanker, Prop.M/s.Durga Kirana Bhandar

Rs.1,00,000/-

Irman Mohammed, prop.

M/s.Royal Agencies

Rs.1,00,000/-

Rampal Jaiswal, Prop.,M/s.Rampal Jaiswal General Merchant

Rs.1,00,000/-

Deepak Kumar, Prop.M/s.Deepak Agencies

Rs.1,00,000/-

Rajendra Kumar Maheshwari, Partner

Rs.1,00,000/-

Ashwani Kumar Sharma, Accounts Assistant M/s.Awadh Wood Products

Rs.50,000/-

Rakesh Kumar Sinha, Accountant M/s.Awadh Wood Products

Rs.50,000/-

M/s.Indian Wood Products Co.Ltd.

Rs.10,00,000/-

R.K.Agarwal, Finance Manager, M/s.Indian Wood Product

Rs.10,00,000/-

M/s.Roxor India Ltd.

Rs.2,00,000/-

Flex Industries Ltd.

Rs.6,00,00,000/-

Ashok Chaturvedi, MD, M/s.Flex Industries Ltd.

Rs.2,00,00,000/-

A.P.Singh, Sr.GM, M/s.Flex Industries Ltd.

Rs.1,50,00,000/-

Anil Kumar Sharma, Asst.GM, M/s,Flex Industries Ltd.

Rs.1,50,00,000/-

Rajeev Sharma, Divisional Manager M/s.Flex Industries Ltd.

Rs.1,00,00,000/-

M/s.Pitambra Freight Carriers

Rs.10,00,000/-

Bal Kishan Sahu, Partner M/s.

Pitambra Freight Carriers

Rs.3,00,000/-

M/s.A.V.S.Rotopact Pvt.Ltd.

Rs.25,00,000/-

Ambrish Kumar Chaurasia, Director M/s.A.V.S. Rotopack (P) Ltd.

Rs.7,50,000/-

2.Show Cause Notice dt.26.06.2002 S.No. Name of the party Confirmation of duty Imposition of penalty 1 M/s.HSG Rs.3,80,100/-

Rs.12,90,000/-

M/s.HSG Rs.8,26,200/-

M/s.HSG Rs.2,700/-

M/s.HSG Rs.81,000/-

Mahesh Singh, MD of M/s.HSG

Rs.3,00,000/-

Anju Singh, Prop., M/s.Anju Agencies

Rs.1,00,000/-

Rajneesh Tewari, Manager of M/s.

Anju Agencies

Rs.20,000/-

Amit Srivastava, Accounts Assistant Of M/s.HSG

Rs.12,000/-

K.N.Singh

Rs.1,00,000/-

Kapil Saxena, Supervisor of M/s.

Anju Agencies

Rs.15,000/-

Rakesh Kumar, Driver

Rs.10,000/-

Kishan, Driver

Rs.10,000/-

M/s.Santan Cold Storage Ltd.

Rs.15,000/-

Om Narain Singh, MD of M/s.Santan Cold Storage Ltd.

Rs.10,000/-

Ms.Rajni Patel, Prop.

of M/s.Gopal Grinding Industries

Rs.15,000/-

3.Show Cause Notice dt.11.12.2002 S.No. Name of the party Confirmation of duty Imposition of penalty 1 Raj Narain Uttan

Rs.30,000/-

Sanjeev Yadav, employee of M/s.

Anju Agencies

Rs.10,000/-

Om Prakash Nigam, Employee of M/s.HSG

Rs.10,000/-

Girish Dubey, employee of HSG

Rs.10,000/-

Ram Chander, employee of M/s.HSG

Rs.10,000/-

Bharat Pal, employee of M/s.HSG

Rs.10,000/-

2. Before we go into the allegations, evidences and findings of the adjudicating authority, we would like to give brief introduction to the various main appellants as regards their activities and status. The main appellant against whom duty stands confirmed is M/s. Harsinghar Gutkha Pvt.Ltd. (hereinafter referred to as HSG) are engaged in the manufacture of Harsingar and Mahesh brands of pan masala and pan masala containing tobacco commonly known as Gutkha falling under sub heading 2106.00 and 2409.40 of the Central Excise Tariff Act. Shri Mahesh Singh is the Managing Director of HSG. Earlier Harsingar brand pan masala was manufactured by Shri K.N.Singh, who is the father of Shri Mahesh Singh prior to coming into existence of HSG. Shri K.N.Singh owns the brand name Harsingar. Shri Amit Srivastava and Shri Mukesh Bajpai were the employees of HSG.

All the excisable products manufactured by HSG were being sold to the sole selling agent M/s. Patel Brothers upto 1999. After 1999, the sole selling agent of HSG became M/s.Anju Agencies, a proprietorship concern owned by Smt.Anju Singh who is sister-in-law of Shri Mahesh Singh. M/s. Anju Agencies were selling the goods to various dealers (almost 16) in the market. Shri Rajiv Tiwari was their manager plus computer operator.

M/s.Mahesh & Company is a trading firm whose proprietor is Shri Mahesh Singh, who is also the Managing Director of HSG. M/s.Mahesh & Company deals in supari & katha which are principal raw materials in the manufacture of gutkha/pan masala. M/s.Mahesh & Company apart from selling supari and katha etc. to HSG were also engaged in the trading of the same to the various other parties.

M/s.Gopal Grinding industries is proprietary concern owned by Ms.Rajni Singh. Ms.Rajni Singh is the sister of Shri Mahesh Singh. The said proprietary concern is engaged in the grinding and processing of raw material, namely, supari, katha and cardmom etc. The said concern is doing the job of grinding of various raw material for HSG on job worker basis. All the processed materials are sent to HSG for use in the manufacture of pan masala and gutkha. It is on record that the said Gopal Grinding was doing the job work of only HSG.

M/s.Flex Industries Ltd. is the manufacturer of packaging materials namely, laminated rolls, which are supplied to HSG. HSG is procuring packaging raw materials from M/s.Flex Industries Ltd. Shri A.P.Singh is the senior General Manager of Flex Industries Ltda. and Shri Anil Singh is the Assistant Manager and Authorised Signatory of M/s.Flex Industries Ltd. M/s.Rix Industries Ltd., Faridabad had also supplied laminated rolls to HSG for some time. Another company M/s.A.V.S.Rotopack Pvt.Ltd. also manufactures and supplied laminated rolls to HSG. Shri Ambrish Chaurasia is the director of this firm.

M/s.Indian wood Pvt.Ltd., Bareilly are manufacturer of katha. They supplied katha to HSG. Shri R.K.Agarwal is the Manager (Finance) in this company. M/s.Awadh Wood Product are partnership firm manufacturer of katha and Shri Rajendra Kumar Maheshwari is the partner, Shri Ashwini Kumar Sharma and Rakesh Kumar are the accountants in this factory.

3. As per facts on records, Revenue received information as regards evasion of duty by HSG. As a result of information received by the Revenue, searches were conducted at the factory premises of HSG, M/s.Anju Agencies, M/s.Gopal Grinding Agencies, M/s.Mahesh & Company and M/s.Santhan Cold Storage and at the premises of various dealers of M/s.Harsingar brand pan masala/gutkha on 04.07.2001. At the time of search of factory of HSG manufacturing operations were found in full swing and 54 pouch filling machines were found installed and working. Scrutiny of the records revealed that RG-1 register was found written only upto 30.06.2001. It was found that 55 bags of gutkha were found to be not accounted for in the books of accounts and the same were seized. The seized goods were given to Shri Mahesh Bajpai, the authorised signatory under supurdnama dated 04.07.2001 for safe custody. Certain other discrepancies were also noticed in the records. Two vehicles loaded with 70 bags of Harsingar brand Gutkha consigned to M/s.Sudhir Chand Gupta and M/s.Jaiswal Stores under invoices No.607 and 608 both dated 04.07.2001 issued by M/s.Anju Agencies were also intercepted. Statements of drivers as also of supervisors were recorded admitting loading of the goods from the factory of HSG and not from M/s.Anju Agencies. As according to te Revenue the goods were not duty paid, the trucks alongwith the goods loaded therein were seized.

4. During the course of search at the business premises of M/s.Mahesh & Co., M/s.Gopal Grinding Industries and M/s.Sanatan Cold Storage, huge number of records were seized from all the premises and during the further course of investigation statements of various persons were recoded.

5. The computers of HSG, Mahesh & Co., Gopal Grinding Industries, Anju Agencies as also of Patel Brothers were seized. Subsequetly, the said computers were handed over to one software expert company, M/s.Stellar Information Systems (hereinafter referredto as Stellar) and data, either allegedly deleted or superimposed, was retrieved from the seized computers of various appellants and based uon the same, allegations of clandestine manufacture and clearance were made, resulting in consequent confirmation of demad. The evidenciary value of such retrieved and re-constructed data by M/s.Stellar shall be dealt at the appropriate place.

6. Further, Revenue procured 56 copies of invoices/sale bills from an informer (details not disclosed) and copies of 18 sale bills/invoices issued by M/s.Anju Agenies and M/s.Patel Brothers and copies of few challans of M/s.Gopal Grinding Industries issued for delivery of ground material to HSG were also collected from the Trade Tax Department. Revenue confronted various persons with the said documentary evidence and recorded their statement. Elaborate investigations were carried out. The dealers of M/s.Anju Agencies were shown some of these invoices and their statements were recorded and most of them denied having received pan masala or gutkha against such invoices or having received said goods against cash and deposed that payments were always made by cheque. We shall also be dealing with the said evidence (dealers statements) at the appropriate place. Based upon scrutiny of the said evidences collected by the Revenue during the course of investigation and also based upon the data relating to production and clearances of excisable materials retrieved from the computers of various manufacturers, with the help of software expert M/s.Stellar information System Pvt.Ltd., New Delhi, proceedings were initiated against the appellants for confirmation of demand of duty on the allegation of clandestine manufacture and clearances of their final products i.e. pan masala and gutkha. The details of said show cause notices adjudicated by the Commissioner, stands given in the preceeding paragraphs. We make it clear that instead of first repeating contents of various statements recorded during investigations and evidences etc., we propose to refer to the said statements at the time of dealing evidences, as relied upon by the Revenue and contested by the appellants.

7. The matter was argued by both sides on 31.01.2013, 01.02.2013, 04.02.2013 to 06.02.2013 and 18.02.2013. Thereafter written submissions were filed by both sides on 15.03.2013. Detailed arguments were advanced from both sides. We deem it proper to reproduce the entire arguments made by Shri K.K.Anand, Advocate and other Advocates appearing for the appellants and Shri Mohan Prasaran, ASG and Shri Meyyappan, Advocate on behalf of the Revenue as compiled by them in their written submissions filed by both sides.

(I). DETAILS/BREAK UP OF DUTY DEMAND CONFIRMED BY THE COMMISSIONER.; RELATED EXHIBITS RELIED UPON; PAGES OF ORDER-IN-ORIGINAL GIVING FINDINGS THEREON (A) DUTY DEMAND ON THE BASIS OF SINGLE RAW MATERIAL, NAMELY, SUPARI.

Evidence Supporting documents Demand confirmed (In Rs.) Exhibit No./Paper-book Sl No. Page No. on which findings given in this regard.

Raw material: Supari

1. Less recording of Supari in Form IV Register as compared to the quantizes purchases on the basis of invoices as recorded in the Schedule II of the Balance Sheet for the years 1997-98, 1998-99 and 1999-2000 Form IV Register and Balance Sheets of the respective years 19,11,714 92,40,457 68,44,571 1,79,96,742 Exhibit 45A, 20 A-I, 52, 20A-II, 45C & 20A-III 198

(i) 8960 Kg of Supari received from M/s. Halgappa Arecanut Traders issued for grinding two times in private records, recorded in Form-IV only once Relevant Invoice No. 1184 dated 19-2-99; Register showing entry of grinding challan no.36 dated 23.8.99, Stock Register, Form-IV for 1999-2000 Exhibit 53, 54, 55 & 20 A-III 200

(ii) 4500 Kg of Supari bought from M/s. Campco entered in the private records twice but entered in Form-IV only once Relevant Private Register, Form-IV for 1999-2000.

Exhibit 54C, 20A-III 201

(iii) A quantity of 24000 Kg. of Supari not accounted for in the private Register Relevant Private Register No.118 Exhibit 54A 202 53,51,429 3 Less recording of Supari in Form-IV as compared to the quantities purchased as per the purchase Invoices in the F.Y. 2000-01 Stock Register and Form-IV register for the relevant period 31,60,000 Exhibit 3DD & 20A-IV 199 .4.

Less recording of Supari in the stock register of 2001-02 as on 1.4.2001 as compared to the closing balance as on 31-3.2001 Computerized stock register of the year 2000-01 and 2001-02 28,03,168 Exhibit 3DD & 3EE 203

5. Diversion of Supari from Mahesh & C., which was shown to have been sold in cash to different buyers

(i) HSG purchased red varieties of Supari. The same varieties were purchased by Mahesh & Co. also. These varieties are used exclusively in the manufacture of Pan Masala Gutkha Purchase of Supari as shown in Annexure by HSG and Mahesh & Co.

Annx. XI (i) Annx. XI (ii) Total quantity = 14,08,621.90

6. 2572.030 Kg of Supari were found short during physical stock verification at the factory of HSG on 04.07.2001 Panchnama drawn on the factory and Form-IV register for 2001-02 6,29,887 Exhibit 20A-V 186 (B) DUTY DEMAND ON THE PROCESSING OF SINGLE RAW MATERIAL, NAMELY, SUPARI BASED UPON THE DOCUMENTS OF GOPAL GRINDING INDUSTRIES WHO WAS PROCESSING, INTER ALIA, SUPRAI ON BEHALF OF HSG.

Evidence Supporting documents details Demand Confirmed (In Rs.) Exhibit No./Paperbook Sl. No. Page No. on which findings given in this regard.

Supari :

(i) The data deleted from the computer hard disc of Gopal Grinding Industries was retrieved by Stellar Information System. This shows four challans used seven times for delivery of grinded material by Gopal Grinding Industries to HSG. On comparison with Form-IV of the corresponding period/date, it is seen that many of the deliveries were not entered in Form-IV. A total quantity of 9,86,710 Kg of Supari received by HSG without accounting during period from 1999-2000 to 2001-02

(i) Retrieved documents by Stellar Information System.

(ii) Statement of Ashish Mishra

(iii) Form IV of the corresponding period

(iv) Statement of Shri Mahesh Singh

(v) Statement of Rajni Patel 15,02,56,531/-

167

(ii) Seven Challans, all bearing S.No. 6 given by Trade Tax department showed delivery of grinded material. Against these challan, a quantity of 13800 Kg of Supari was delivered by Goptal Grinding Industries to HSG but in Form-IV only 6480 Kg have been entered against these challans. Thus, a quantity of 7320 Kg of Supari was not entered.

(i) 07 Challans procured from Trade Tax department.

(ii) Challan resumed at HSG

(iii) From-IV of the year 2001-02 17,92,633 Ex-22A to G Ex-23A & 23B Ex-20 A-V 172

(iii) 55024.80 Kg of Supari delivered under cash memo by Gopal Grinding Industries to HSG were not entered in records by them. The copies of these cash memo were given by Trade Tax department.

(i)Statement prepared by Trade Tad department on the basis of cash memos.

(ii)Form-IV for the year 1999-2000 1,34,75,461 Ex-57 Ex-20A-III 173

(iv) Discrepancy in the opening balance as on 1.4.2000 in the stock register of Gopal Grinding Industries wherein they arbitrarily reduced the balance by 10,000 Kg which was diverted to HSG

(i) Stock register

(ii) Statement of Ashish Mishra

(iii) Statement of Rajni Patel

(iv) Statement of Mahesh Singh

(v) Statement of Ajai Pandey 14,28,570 Ex-58B Ex-67A&B Ex-148 Ex-194 Ex-139 175

(v) Shortage of 57701.800 Kg in the combined stock of Mahesh & Co. and Gopal Grinding Industries.

(i) Panchnama dt. 4.7.01 drawn at Gopal Grinding Industries

(ii) Stock Register of GGI & Mahesh & Co. for 2001-02.

(iii) Panchnama drawn at Sanatan Cold Storage on 31-7-01.

(iv) Statement of Ashish Mishra.

(v) Statement of Rajni Patel.

(vi) Statement of Mahesh Singh.

(vii) Statement of Ajai Pandey.

1,41,31,053 Ex-59 Ex-58D, 60 & 60A Ex-61A & 61B Ex-67A&B Ex-148 Ex-194 Ex-139 176 (C) DUTY DEMAND ON THE BASIS OF R DOCUMNTS I.E. RECONSTRUCTED DOCUMENTS.

Evidence Supporting documents details Demand Confirmed (In Rs.) Exhibit No./Paperbook Sl. No. Page No. on which findings given in this regard.

R-documents showing production and clearances during the period from Feb. 1999 to 3-7-01.

(i) Panchnama of mirror images dt. 23-01-92.

(ii) Certificate of Stellar Information System Ltd dated 2-05-02.

(iii) R-Documents retrieved from the CPU of HSG.

(iv) Statement of Rajnish tiwari dt. 10-05-02.

(v) Statement of Mahesh Singh dt. 13-06-02.

(vi) Invoices corresponding to some R-documents (745, 735, 793, 865, 830, 835) 25,57,79,672 Ex-37 Ex-38 Ex-88 read with Annx XIIIA & XIIIB 11G 19 O 25 145-149 Seizure of unaccounted stock of 55 bags of Gutkha in the factory on 7-7-01.

(i) Panchnama dt 4-07-01.

(ii) Supurdnama dt 4-7-01.

(iii) RG-1 (2001-02) 1,48,500 (on seized goods) 1 1A 20 52 bags of Gutkha entered in RG-1 but removed without issue of invoice and without payment of duty

(i) Panchnama dt 4-7-01

(ii) RG-1 1,55,250 1 20 183 Production of 514286 pouches of Pan Masala Gutkha the raw materials issued on 2nd & 3rd July 2001 but not found available in the factory on 04-07-2001.

(i) Form IV

(ii) RG-1 1,54,286 20A-V 20 185 (D) DUTY DEMAND ON THE BASIS OF 72 INVOICES OUT OF 74 INVOICES ALLEGEDLY PROVIDED BY THE INFORMER AND TRADE TAX DEPARTMENT AND ON THE BASIS OF STOCK REGISTER OF ANJU AGENCIES, PATEL BROTHERS SHWOING DETAILS OF THE INVOICES ISSUED BY THEM DURING ITHE DISPUTED PERIOD I.E. 1-4-98 TO 3-7-2001.

Evidence Supporting documents details Demand Confirmed (In Rs.) Exhibit No./Paperbook Sl. No. Page No. on which findings given in this regard.

Invoices of sole selling agents showing removal of goods by them which were altered and quantities were reduced in the computer of sole selling agents. Total 74 invoices. In 2 cases, quantities in the invoice given by informer/Trade Tax matched with quantity showin in corresponding invoice in computer by sole selling agent. In cases of remaining 72 invoices, it did not match. Invoices issued during the period from 1-4-98 to 3-7-01.

(i) 74 invoices given by the informer & Trade Tax department.

(ii) 72 invoices corresponding to the 72 invoices given by informer in which quantities were reduced post delivery.

(iii) Statement of Rajnish Tiwari dt. 4-7-01, 5-7-01 & 6-7-01.

(iv) Statement of Amit Srivastava dt. 4-7-01, 5-07-01 & 6-7-01.

(v) Statement of Mukesh Bajpai dt. 5-7-01.

(vi) Statement of proprietors of sole selling agents

(vii) Statement of Mahesh Singh dt. 25-07-01 & 24-01-02.

(viii) Report of Stelleer Information Systems.

(ix) Stock Register of Anju Agencies/Patel Bro. containing details of the invoices issued during the said period.

85,77,000 25/1 to 25/72 18/1 to 18/72 11A to 11C 12A to 12C 10C 130, 131 19A, 19H 38 Annx VII Annx VIII & IX 35 127 131 Seizure /recovery of incriminating records showing unaccounted receipts of Harsinger Gutkha at the premises of Pappu Salesman, Balamau, Sri Ram Trading Co., Lakhimpur and Kamal Pan Bhandar, Kashipur

(i) Panchnama dt. 4-07-01.

(ii) Notebook showing receipt of Harsingar Gutkha.

(iii) Cash memo books showing sale of Harsingar Gutkha

(iv) Statement dt. 18-10-01 of Pappu Salesman (Shiv Kishor).

(v) Ledger of Sri Ram Trading Co.

(vi) Ledger Account of Anju Agencies

(vii) Invoices of Anju Agencies recovered from Kamal Pan Bhandar.

(viii) Stock Register of Anju Agencies 2001-01.

6,88,500 2,43,000 11,976 Ex-13 Ex-46 Ex-47/1 to 47/4 Ex-15C Ex-48 Ex-34D Ex-50/1 to 50/8 Ex-35D 195-198 Invoice No. 236 dt. 30-1-99 of HSG showing clearance of 900 kgs of Harsingar Gutkha as against the entry of 1350 kg. against the same invoice in the records of patel Brothers, sole selling agent.

(i) Invoice no. 236 dt. 30-01-99.

(ii) Stock Register of Patel Brothers for the year 1998-99.

45,000 Ex-51 Ex-35A 181-182 Receipt of 255 bags of unaccounted Harsingar Gutkha on 1-4-01 by Anju Agencies from HSG showin in the opening balance of stock on 1-4-01.

(i) Stock Register of Anju Agencies 2000-01.

(ii) Stock Register of Anju Agencies 2001-02.

6,88,500 Ex-35D Ex-35E 187-188

(a) 2490 kg. of Gutkha and 58 kg. of Sada Pan Masala not carried over as opening balances on 1-4-01 in the stock register.

(b) 1236.500 kgs. Of Harsingar Gutkha and 33.600 kg loose sada pan masala shown as opening balance in balance Sheet for the year 1998-99 not carried over as opening balance in RG-1 for the said year Balance Sheet (1998-99)

(c) Excess clearances of Harsingar Gutkha weighing 7465.300 kg. and 4328.00 kg in the year 1998-99 & 199-2000 respectively as shown in Balance sheet as compared to RG-1 for the corresponding period.

(i) Stock Register of finished goods 2001-02 and 2001-02.

(i) Balance sheet (1998-99)

(ii) RG-1 (1998-99)

(i) Balance sheet for 1998-99 & 1999-2000

(ii) RG Register for the said year 4,35,971 1,27,010 11,79,330 Ex-3CC Ex-3DD Ex-45B Ex-20/3 Ex-45B, 45C Ex-20/2, 20/3 182-183 178-179 180 On 4-07-01, excisable goods were removed from the factory of HSG on the strength of five invoices/sale bills of Anju Agencies from S.No. 606 to 610

(i) 5 invoices dt. 4-7-01

(ii) Statement of Rajnish Tiwari dt. 4-1-01.

(iii) Statement of Amit Srivastava dt. 4-7-01.

(iv) Statement of Mukesh Bjapai dt. 5-7-01.

(v) Statement of Raja Ram Gupta dt. 26-11-01.

(vi) Statement of Mohd. Idris dt. 5-7-01

(vii) Statement of accounts submitted by Agarwal Traders.

3,80,100 (for Inv. No. 607, 608) 3,61,000 (for inv. No. 606, 609 & 610) 11B 12B 10B 29C 18 33B 193

(a) Reconstructed documents ST documents showing clearances of harsingar brand Pan Masala Gutkha to various outstation locations (dealers) by Patel Brothers during 3-1-99 to 30-1-99

(b) Reconstructed document (ST document) sowing summary of Patel Brothers during 8-2-99 to 26-2-99.

(d) Reconstructed document showing dispatches from HSG to Anju Agencies during 01-01-00 to 31-03-00

(e) Reconstructed document showing dispatch of Patel Brothes to outstation locations during 1-4-99 to 13-4-99.

Document No. Stellar/ha/unused data/ok/dbf/ST00536 Stellar/ha/unused-data/ok/dbf/ST 00538 ST000625-dbf & ST000625-edited-dbf J:/Stellar./nju/existing/data/OLC-FA/FA-4/PUKBILL-A4/5A.

(i) ST000546 & ST000613 edit.

(ii) Panchnama of mirron image dt. 23-01-02

(iii) Certificate of Stellar Information Systems dt. 2-5-02

(iv) Statement of Rajnish Tiwari dt. 10-05-02.

(v) Statement of Mahesh Singh dt. 13-06-02.

6796500 8242500 11138250 17022600 4151500 Ex-91/1 Ex-91/2 Ex-89/1, 89/2 Ex-90/1, 90/2 Ex-92/1, 92/2 Ex-37 Ex-38 11G 190 153-157 (II) ALLEGATIONS IN BRIEF:

? HSG were indulging in huge evasion of duty on the sales bills/invoices of Patel Brothers (upto 31-12-99) and Anju Agency w.e.f. 1-1-2000 which were provided to cover clandestinely removed goods in transit.

? HSG were clearing about 70 to 135 of pan masala/gutkha at a time under the cover of each one of such invoices, which were withdrawn and destroyed once the goods reached the destination.

? 56 copies of such invoices/bills were provided by the informer and 18 such sales bills/invoices which were issued by Anju Agency and Patel Brothers and a copy of few challans of Gopal Grinding Industry were collected from the Trade Tax Department.

? Unaccounted supari was received from Mahesh & Co. which was grinded through Gopal Grinding Industry, a proprietary concern owned by Mrs. Rajni Singh, sister of Shri Mahesh Singh and such accounted processed supari was used in the manufacture of finished goods by HSG.

? Raids were conducted on 4-7-2001/5-7-2001 by the Central Excise officers at the factory premises of the HSG, M/s. Anju Agencies, M/s. Gopal Grinding Industries, M/s. Mahesh & Co., M/s. Sanatam Cold Storage and at the premises of various dealers of Harsingar brand Pan Masala/Gutkha.

? During the searches some discrepancies were found in the operation of the machines, stock of finished goods and raw materials and also in the maintenance of the records.

? Incriminating statements were recorded from various employees of HSG, Anju Agencies, Gopal Grinding Industries, Mahesh & Co., suppliers of lamination and the dealers. .

? Some of the incriminating documents were purportedly reconstructed/retrieved from the CPUs of various parties through the help of Stellar Information Systems Ltd. (hereinafter referred to as Stellar), a software company based at New Delhi.

? The comparison between the 74 invoices provided by the informer/collected from Trade Tax Department with the retrieved invoices from the computers suggested that the Patel Brothers/Anju Agencies used to reduce the quantity to 1 to 5 bags in the said computers.

? That, after the delivery of the goods at the destination the invoices were returned to Anju Agencies, the quantities used to be reduced 1 to 5 bags from the original 70 bags and the copies of the original invoices used to be destroyed and replaced with edited invoices/bills after altering the quantity and value etc. ? The statements of the drivers of the trucks and supervisors were recorded who allegedly stated that the vehicles were normally being used for transporting 70 bags or more of gutkha/Pan Masala instead of 1 to 3 bags.

? The incriminating statements of various employees of the HSG, such as Shri Amit Srivastava, Shri Mukesh Bajpai were recorded and also of Shri Rajneesh Tewari Manger of Anju Agencies were recorded. On the basis of the said statements and on the basis of alleged documents, the department came to the conclusion that they were from time to time were instrumental in preparation of invoices and altering the entries therein.

? They manipulated the records of M/s. Anju Agencies as well as HSG. It is the departments case that a comparison between copies of the invoice provided by the informer and the corresponding hard copies retrieved from the computer very clearly suggested that one Shri Jayant Mishra on behalf of M/s. Patel Brothers was responsible for carrying out unauthorized changes in the invoices issued through the computer.

? That, during the material time Anju Agencies had 16 dealers through whom they were selling gutkha/pan masala received from HSG. However, out of the 16 dealers proceedings were drawn against 14 dealers as 72 invoices related to 14 dealers.

? That, dealers were confronted with some of the 72 invoices and majority of the same denied having received goods on the strength of the said invoices.

? The documents retrieved/reconstructed by stellar were shown to the employees and Shri Mahesh Singh of which they denied any knowledge.

? That, on the basis of the aforestated allegations the department issued three show cause notices dated 31-1-2003, 26-6-2002 in respect of seized goods and 11-12-02 proposing confiscation of the vehicles. Details of the show cause notices with duty demand break up enclosed as ANNEXURE-3.

? The seizure details in show cause notice dated 26-6-2002 also enclosed as ANNEXURE-4.

? The show cause notice dated 11-12-2002 Page No.366 to 466 Vol. 2 only relates to the proposal to confiscate the various vehicles under seizure.

? The show cause notices were also issued to Anju Agencies, Patel Brothers, Mahesh Singh MD of HSG, , Mahesh & Co., Gopal Grinding Industries, Shri K.N. Singh, Mrs. Rajni Singh, employees of HSG, Anju Agencies, 14 dealers out of 16, suppliers of lamination etc. ? The aforestated show cause notices have been adjudicated upon vide common order-in-original. In terms of the impugned order, the demand of duty from HSG to the tune of Rs.1,37,63,64,527/- has been confirmed. It may be stated here that in the show cause notice there was a demand of duty to the tune of Rs.138,52,90,875/- for the period 1997-98 to 2001-02 (upto 4-7-2001) for which show cause notice dated 31-1-2003 was issued. The Commissioner has confirmed the aforestated demand and dropped the remaining demand in the impugned order Equal amount of penalty under Section 11AC read with Rule 173Q of Central Excise Rules, 1944/Rule 25 of Central Excise Rules, 2001 has been imposed. A penalty of Rs.10 crore has been imposed on Shri Mahesh Singh, Managing Director of HSG under Rule 209A of Central Excise Rules, 1944/Rule 26 of Central Excise Rules, 2001. Further, a penalty of Rs.2.5 crore has been imposed on Shri Mahesh Singh as Proprietor of M/s. Mahesh & company under rule 209A of Central Excise Rules, 1944/Rule 26 of the Central Excise Rules, 2001. Penalties have been imposed on the other noticees/co-noticees also.

(III) CATEGORIES OF DUTY CONFIRMED & FINDINGS OF COMMISSIONER ON EACH CATEGORY:

(A) The duty demand of Rs.63.97 crores:

The Adjudicating Authority has dealt with portion of demand in pages 102 to 140 of the Adjudication order. Out of the huge demand of Rs.63.97 crores a demand of Rs.85.77 lakhs is based on 72 invoices (out of 74 invoices) of M/s. Patel Brothers and M/s. Anju Agencies, which were provided by the informer and allegedly procured from the Trade Tax department. The remaining portion of the huge demand is based on reconstruction of deleted data in the hard disk of CPU of M/s. Anju Agencies. The reconstructed invoices are 4557 in numbers. Wherever quantities of 1 to 5 bags are shown in the charts enclosed as Annexure VIII A to VIII D to the show cause notice at Pages 23 to 89 Vol 18. The adjudicating authority has held that the number should be 70 bags per consignment based on the statements of some of the persons involved. In respect of 72 invoices the learned Commissioner has held that due to technical constraints it was not possible to retrieve the original 72 invoices carrying correct particular from the concerned CPU of M/s. Anju Agencies/M.s, Patel Brothers as these particulars in the original invoices had subsequently edited by superimposition of incorrect particulars. Though he agreed that the 72 invoices were only Xerox copies of original invoices but since the value of the invoices/sale bills given by the informer by the Trade Tax Department was identical to the sale bill generated from the computer of M/s. Anju Agencies and the same bear the signatures of S/Shri Amit Srivastava, Rajnish Tewari or Jayant Mishra. and since the signatures have been identified by S/Shri Rajnish Tewari and Amit Srivastave in their statements, which lend credibility to the authenticity of the sale bills tendered by the informer/Sales Tax Department. (page 129 to 131 of O/O) However, the learned Commissioner reduced the demand from Rs. 88,32,000/- to Rs. 85,77,000/- on the ground that the department had calculated this duty demand by adopting figure of 70 number of bags per consignment whereas the actual number of bag in all these 72 invoices was less by 105 number of bags (page 132 of O/O). As regards the remaining duty demand of on 4557 invoices, he has held in para 30.45 (page 130 of O/O) that the proposed duty demand has been worked out for the period from 1998-99 to 2001-02 on the basis of editing of original entries of quantity, value & consignee of actual sale in the sale invoices of M/s. Patel Brothers & M/s. Anju Agencies. Out of the total invoices/sale bills issued by the said two sale selling agents during the said period, the department has been in possession of 74 invoices, fifty six given by the informer and eighteen by the Trade Tax Department. In 72 cases it was found that details pertaining to sale were found to have been edited on the office copy of sale bills/invoices, printouts of which were taken out from the CPU of sole selling agent.

(B) Demand of Rs.30.31 crore This portion of demand has been dealt with by the Commissioner at pages 141 to 157 of the impugned order.

This demand has been confirmed on the basis of reconstruction of allegedly old /deleted/destroyed data from the computer hard disk seized from the premises of the HSG, M/s. Anju Agencies, M/s. Gopal Grinding Industries, M/s. Mahesh & Co. and M/s. Sanathan Cold Storage on 04/07-2001. The department has taken the help of M/s. Stellar Information Systems Ltd. (hereinafter referred as Stellar) for reconstruction of deleted data. This reconstructed data has been termed as R-documents and it has been held that the quantities shown in these R-documents were clandestine removals of the Gutkha by HSG The learned Commissioner in para 31 onwards (page 141 of O/O) has held that this demand is based on retrieval/reconstruction of data which had been deleted from 5 CPUs seized from the premises of HSG, Anju Agencies, Gopal Grinding Industries and M/s. Sanatam Cold Storage on 04-07-2001. Mirror images from the CPUs were taken on fresh hard disks by M/s. Stellar Information Systems Ltd and the deleted data was reconstructed/retrieved and information of said deleted files, which could be retrieved were supplied to department in CD by the said stellar; That the reconstructed data as contained in the exhibits referred by the party & relied upon by the department to be the same as the data which was available in the computer on 04-07-2001. It is clear that data entered in the said CPU before the recovery on 04-07-01, remained intact and was actually the data fed by the party only. In the light of the above, it is evident that data retrieved by M/s. Stellar later, was fed by the party before 04-07-01 and commands perfect evidentiary value. These all documents show daily production and dispatches of HSG and were in process of the production entered in RG-1 Register by them.

That, the department has relied upon only that data which could be genuinely reconstructed as a result of exercise taken by M/s. Stellar. Further, on comparison of the production shown in 32 loose sheets which were recovered from the factory of HSG on 4-7-01 tallied with the production shown in R- documents for all 15 days. Further 6 invoices provided by the informer/Trade Tax Department also tallied with the corresponding R- documents (page 148 of O/O).

On the basis of these R documents, the learned Commissioner has confirmed duty demand of Rs. 25,57,79,672/- (page 149 of O/O). Besides this demand another demand of Rs. 67,96,500/-, Rs. 82,42,500/-, Rs. 1,11,38,250/-, Rs. 1,70,22,600/- & Rs. 41,51,500/- has been confirmed in page 153 of O/O) on M/s. Stellar documents such as ST-000536, ST-000538 (Exhibit 91/2), ST-000625 (Exhibit 89/1) etc. According the learned Commissioner these documents show sales summary of Patel Brothers for different periods which were cleared by HSG without payment of duty.

This duty demand has been dealt with by the Commissioner from pages 166 to 178 of the impugned order.

Out of this demand of Rs.18.19 crores, the major portion is based on the reconstructed data of hard disc of the CPU of M/s. Gopal Grinding Industries (GGI). M/s. Gopal Grinding Industries was cutting/crushing the supari, katha and cardamom on behalf of the HSG on job work basis.

According to learned Commissioner GGI was owned by MS Rajini Patel who is younger sister of Sh. Mahesh Singh, MD of HSG. That, records recovered from the premises of M/s. GGI, revealed close interconnection between the two firms. He held that, the challans of M/s. GGI to be perfectly admissible as evidence for proving duty evasion by HSG; That, the challan of M/s. GGI reconstructed from the computer were issued in respect of the materials not entered in Form-IV by M/s. HSG; That reconstructed data retrieved from deleted files show authentic information and has got evidentiary value (page 170 of O/O). He confirmed duty demand in respect of supari allegedly received on the basis of seven challans bearing S.No. 6 dated 17-05-2001 provided by Trade Tax Department. According to him even if these challans have not been retrieved from the CPU of GGI still duty could be confirmed as the same was deleted and superimposed and could not be retrieved. He, therefore, confirmed demand on the basis of 986710 kgs. Of cut supari sent by M/s. GGI to HSG and another 7320 Kgs. of supari was sent by using multiple challan No. 06 dated 17-05-2001 (page 171 of O/O). Another demand of Rs. 1,34,75,461/- has been confirmed on 55024.800 Kgs. Of supari (para 33.16 page 172 of O/O) on the strength of cash memo No. 1 dated 01-04-2000 to 1219 dated 09-12-2000 and the said quantities were not found entered in Form-IV of register of HSG. According to learned Commissioner the said statement has been duly attested by A.C. Special Investigation team, Trade Tax Department, Lucknow Zone, Lucknow (page 173 of O/O). However, the learned Commissioner reduced the demand from Rs. 1,34,75,461/- to Rs. 89,83,641 (para 33.22 page 174 of O/O). Another demand of Rs. 14,28,570-00 has been confirmed on the ground that 10,000 kgs. of supari was short entered in the records which according to the learned Commissioner was issued for clandestine removal. According to him the closing balance of FY 1999-2000 was 52,817,440 whereas opening balance as on 1-4-2000 was 42,817.440. He has not accepted submission of HSG that the mistake was rectified subsequently.

Another demand of Rs. 1,41,31,053/- has been confirmed on the ground that on physical stock taking on 4-7-2001 in the factory of GGI a quantity of 67701.800 kgs. was found short (para 33.38 page 176 of O/O). According to learned Commissioner the said stock of supari was diverted and used in the manufacture of Gutkha by HSG.

(D) Duty demand of Rs.2,11,56,742/-

This duty demand has been confirmed on the basis of findings rendered at pages 198-199.

The department worked out the difference in receipt of supari as recorded in the balance sheets, purchase invoices and stock register and compared the same with the quantity recorded in Form-IV Register. The differential quantity was held to be used for manufacturer of pan masala/gutkha involving duty of Rs.2.11 crores.

In respect of this demand it was the submission of the HSG that Balance Sheet & Stock Register of the firm was in respect of uncut supari whereas the quantity accounted for in Form-IV register was in respect of cut supari received after grinding into granules from M/s. GGI and there is a wastage of supari in terms of powder in huge quantity when uncut supari is subjected to the process of cutting into granules. According to the learned Commissioner records of these principal raw materials are maintained in pursuance Rule 55 and Rule 173 of the erstwhile Central Excise Act, 1944, which were statutory. The party has mentioned Supari as the title under which entries had been made in Form-IV register. There is no mention of Cut or Uncut supari. (para 44.3, page-199 of O-I-O). Hence according to the learned Commissioner, demand on this count was sustainable.

(E) Duty demand of Rs.53,51,429/-

This duty demand has been dealt with by the Commissioner at pages 199 to 202 of the impugned order. HSG received 8960 kgs of supari under invoice No.1184 dated 19-2-1999 and it was entered in stock register on 20-8-1999. This quantity was issued to Gopal Grinding Industries under Challan No.36 dated 23-8-1999. However, in grinding register, date of this Challan No.36 was mentioned as 8-8-1999 and this was a clerical mistake. There was absolutely nothing to show that two consignments of the said quantity were received or issued for cutting. The Commissioner has however confirmed the demand by holding that apart from mentioning it as a clerical mistake no other evidence has been produced to show that these were actually clerical mistakes. (para 44.7, page 200 of O-I-O).

In respect of another quantity of 4500 kgs there was a clerical mistake in mentioning invoice No.74051 instead of 24501. This was a clerical mistake but the Commissioner has held that the HSG should have made necessary rectification and that in the absence of any evidence of clerical mistake, this quantity must be taken to have not been recorded in the records. (para 44.12, page 201 of O-I-O).

There was also a subtraction mistake due to clerical error in respect of the quantity of 24,000 kgs which was rectified in the records. The Commissioner has however held that why a mistake should be rectified after a gap of time and why proper remarks were not given for the discrepancy and due to this and reason the said quantity must be held to be clandestinely received and then used for manufacturer of goods clandestinely cleared. (para 44.15, page 202 of O-I-O).

(F) Duty of Rs.28,03,168/-

Based on the stock register it was alleged that a quantity of 11,446.270 kgs was less carried forward in the opening balance of 1-4-2001. It was submitted that this stock lying with Gopal Grinding Industries was wrongly included in the computer and the mistake was rectified. The Commissioner has held that he is not quite convinced with the explanation and that while rectifying the mistake no remark or indication was given explaining the discrepancy. (para 44.19, page 203 of O-I-O).

(G) Demand of Rs. 22.43 crores:

This demand has been confirmed on the basis of reconstructed data allegedly taken from the computer of M/s. Mahesh & Company who were supplying supari & Katha to the HSG. The adjudicating authority has dealt with this issue at pages 203 to 212 of the Order-in-Original. It has been held that M/s. Mahesh & Company had made cash sales of uncut supari of red variety. It has been presumed that all the supari which has been sold on cash basis by Mahesh & Co. should have been gone to HSGs only and from this quantity it has been presumed that the HSG could manufacture Gutkha/Panmasala and cleared the same without payment of duty.

There was an allegation that on scrutiny of print outs of the stock register, credit sales register & cash sales register from their computer taken it was revealed that M/s. Mahesh & Co. diverted 1408621.90 kgs. of supari involving duty of Rs. 22,43,58,638.00 According to the learned Commissioner the charge of diversion of the said supari by Mahesh & Co. to HSG are based on valid grounds as almost the entire quantities of supari purchased by M/s. . Mahesh & Co. are of red varieties which are used exclusively in the manufacturing of Pan Masala. Further, Mahesh & Co. has not been able to explain the particulars regarding at least some of the cash transaction involving huge amount and frequent buyers. He has relied upon the statement of Shri Anjani Kumar, computer operator entrusted with the task of preparation of bills against cash sales, on computer stated that he never met any customer purchasing the goods in cash (para 45.5 page 205 of O/O) . That, a particular ACC code has been allotted to a particular person by M/s. Mahesh & Co. without knowing his identity or address and a person would leave any cash amount with any firm without obtaining any acknowledgement/receipt. He has relied on the statement of Sh. Mukesh Bajpai who stated that the raw materials received without accountal were proportionate to unaccounted manufacture of Pan Masala/Gutkha and payment of unaccounted raw material was made in cash out of sale proceeds of Gutkha/Pan Masala sold without payment of duty. According to learned Commissioenr he was convinced that there was no actual customer, no delivery was effected from Iradatnagar, godown and therefore entire material was sent to the factory of HSG in respect of sales shown as cash transaction to many customers (para 45,5 page 207 of O/O). He also did not accept the submission of Mahesh & Co. that it was Sh. Anant Kumar Verma who was godown keeper of Mahesh & Co. whose- statement was never recorded.

(V) RECORDING OF THE VARIOUS STATEMENTS AND CONTENTS OF THE SAME.

(A) STATEMENTS OF THE DRIVERS OF THE VEHICLES:

? Statement of Shri Krishna recorded on 4-7-2001 (pages 738 to 742/2, 743 to 747/2.

? Shri Krishna stated that no central excise invoice issued by HSG in respect of goods dispatched on 4-7-01 instead of invoice No. 608 dated 4-7-01 of Anju Agencies used.

? Statement of Shri Rakesh Kumar was recorded on 4-7-2001 ( Page 743 Vol. 2).

? Shri Rakesh Kumar stated that bill No. 607 dated 4-07-01 issued by Anju Agencies was used for transporting non duty paid goods.

? Statement of Shri Ram Chander was recorded on 13-12-2001 (page No. 4254/Vol. 15) wherein he gave the names of the purchasers to whom the goods were delivered and their locations such as Agarwal Traders at Sitapur, Raja Ram Gupta at Biswan, Balraj Agarwal at Hardoi.

? On being asked as to how many bags were taken in a single trip he stated that normally he carried 70 bags and he never carried one, two or five bags.

? Statement of Shri Sanjeev Yadav was recorded on 23-01-2002 (page 5241/Vol. 15).

? He made the same averments as Shri Ram Chander and he stated that he used to load the goods from both the premises i.e. M/s. Anju Agencies and HSG.

? Statement of Shri Girish Dubey was recorded on 13-12-2001 (pages 5243-5244 Vol.-15 ) wherein he gave the names of addresses of the dealers and stated that he normally took 70 bags on Tata 407 in one trip and never delivered one, two or five bags.

? Statement of Shri Bharat Pal was recorded on 18-12-2001 (pages 5246-5247/Vo.15).

? He stated that he delivered Harsingar Gutkha at Hardoi, Sitapur, Shahajahanpur and Lakhimpur etc. and his monthly frequency of deliveries was 10 to 12 consignments in a month at outside places.

? he stated that since this is a small carrier, this carries 30 bags per trip.

? He denied to have ever carried a consignment of one, two or five bags.

(B) STATEMENTS OF SHRI MUKESH BAJPAI AUTHORISED SIGNATORY AND MANAGER OF HSG.

? First statement dated 4.7.2001 Exh 10A page 763/Vol.3: Translated copy at page 767/Vol. 3.

? That their sole selling agent was Anju Agencies.

? That they had issued last excise invoice on 29-6-2001.

? That, they never allowed Anju Agencies to use their computer or printer.

? Second statement was recorded on 4-7-01 (pages 768/Vol. 3)- translated copy at page 775/Vol.3.

? He stated that M/s. Anju Agencies was the sole selling agent of HSG;

? Factory runs two shifts a day from 10 A.M. to 6 P.M. and 8 P.M. to 4 A.M. ? In the factory of HSG 400 boras were manufactured per day in both the shifts whereas only 75 boras are shown as manufactured.

? That usually they loaded 70 boras in one truck on the strength of bills which are returned after the goods reached the destination and if both the invoices are returned one to three boras are shown to have been dispatched in the computer.

? That the accounts of HSG are manipulated by Shri Rajnish Tiwari and in his absence by Shri Amit Srivastava.

? He gave the details of the capacity of the various trucks.

? They purchased raw material in No.2 from those parties who supply them raw material in No.1. They purchase 20% raw material in No.1 account and 80% in No.2 and Gutkha is manufactured and sold.

? Third statement dated 6-7-2001 (pages 779/Vol.3-translatded copy at page 789/Vol.3-Exh. 10C) ? He stated that HSG was purchasing supari from Mahesh & Co, Tobacco from Bangalore and Katha from P.C. Traders ? Supari purchased from Mahesh & Co. goes to Gopal Grinding Industries for grinding;

? Supari sold in cash by Mahesh & Co. appeared to be diverted to HSG and pan masala manufactured out of this supari was not accounted for in the factorys records.

? On being asked as to how much supari was purchase by HSG until now and from where he stated that in the year 2000-2001 about 306660 Kg supari and during the year 2001-02 till 13-6-2001 about 1,20,775 Kg supari was purchased in cash for which there are no voucher.

? Ajay Pandey was looking after the computer work of Mahesh & Co. and Gopal Grinding Industries;

? Supervisor of Mahesh & Co. was Shri Ashish Kumar Mishra.

? Fourth Statement dated 25-06-02/793/3- Exh. 10D ? He has already left the job;

? Was shown 32 loose slip/sheets, showed his ignorance as he remained outside the factory.

? Was shown R-Documents - R4 to R444, stated that he did not have any knowledge of the same.

? His first statement was recorded on 4-07-2001/867/Vol.3.

? That invoices were generated on the computers of Anju Agencies by Rajnish Tiwari and the goods were dispatched in the vehicles;

? If party (i.e. consignee) returned second copy the details of such invoices were either deleted or reduced to one to two bags;

? In the absence of Rajnish Tiwari he used to do the job. The factory of HSG runs two shifts i.e. Shift-A and Shift B ? 150 to 200 bags were manufactured in each shift.

? Statement dated 6-7-2001/874/3 ? Was shown some of the 72 invoices retrieved out of the CPU with reduced quantity;

? After delivery of the goods these invoices used to be destroyed ? Statement dated 6-5-2002/876/3 ? No knowledge of R-Documents numbered as R-4 to R-434 and R-435 onwards.

(D) STATEMENTS OF SHRI RAJNEESH TIWARI MANAGER ANJU AGENCIES ? First statement dated 04-07-2001 Exhibit 11 A1 page 810 Vol.3 That delivery of one or two bags is made at our factory gate which is taken by the customer himself.

? Second statement dated 04-07-2001 Exhibit 11A II page 812 Vol 3.

? That invoice No.605 is dated 3-7-2001 and invoice Nos. 606-610 belonged to the clearances of 04-7-2001 which have been already dispatched between 9 to 10 AM on 4-7-2001. The officers took into possession the computer after sealing it before me.

? that preparation of invoice can be done both in HSG factory and Anju Agencies.

? That invoice of materials are prepared and sent.

? On return of vehicles after delivery of goods if the driver returns the 2nd copy of the invoice and parties received one copy of the invoices, it is presumed that it is a Bill and the same is not deleted from the computer.

? If the driver returns both the copies of invoices then after tearing them he entered lesser quantity of material in the computer. Such modus-operandi has been adopted on the instructions of Shri K.N. Singh of Patel Brothers.

? Firstly, he used to delete the records but for the last two months he only edited the records.

? That one person named Shri Rajan was doing this job before his joining in August 1999. He was shown various invoices on which he put his dated signatures.

? That the factory runs daily between 10 AM to 6 PM.

? Third statement dated 5-7-2001 (page-832/Vol.3 Exh. 11C.

? That on 4-7-2001 goods in both the vehicles seized by the Department were loaded in his presence from the factory of HSG.

? Fourth statement dated 10-05-2002; page 859 Vol 3.

? He was shown records on which R-4 to R-444 was written by hand. After seeing the said records he signed on the same but states that he has no knowledge about them.

? Fifth statement dated 20-6-2002 page 861- Vol. 3 ? He was again shown retrieved documents details of which are mentioned in the statement which he stated that some of the documents pertained to the period when he was not in employment and some showed the dispatches made by Shri Patel Brothers/Anju Agencies and further stated that since he was not looking after production work of HSG hence he is not in a position to comment on the same.

(D) STATEMENTS OF SHRI MAHESH SINGH, MANAGING DIRECTOR OF HSG.

? Statement dated 25-7-2001 page 966- Vol 3 ? That supari was being sold by Shri Mahesh & Co. on cash basis. The supari sale was on credit basis to HSG. He was shown the various statements of Shri Mukesh Bajpai, Amit Srivastava and Amit Tiwari which he initially did not agree but the words did not agree which were written in Hindi language were crossed and he was made to state that he agreed with their statements.

? He retracted from the statement next day retraction at pages 166 167 Vol 1.

? Statement dated 23-8-2001- Exhibit 19 D page 972.

? He was shown the statements of some of the dealers to which he submitted that he had no satisfactory explanation.

? Statement dated 11-10-2001- page 977 Vol-3.

? Factory runs two shifts about 3-4 days in a month. He was shown 32 sheets to which he stated that the same were attendance sheets of labourers of the factory which were prepared by the factory shift supervisor and stated that factory might have run two shifts during the said period as shown in 32 sheets on requirements.

? Statement dated 15-1-2002, Exhibits 19J Page 984 J -Vol 3 ? That Shri K.N. Singh did not look after any work in any factory.

? He was shown some discrepancies in the invoices dated 3-7-2001and 4-7-2001 of Anju Agencies to which he stated that some mistakes had happened somewhere.

? Statement dated 23-1-2002 Exhibit 19K page 987 Vol. 3 ? was again shown the statement of Rajneesh Tewari, Amit Srivastava and Mukesh Bajpai wherein they had stated that editing etc was done on the instructions of Shri K.N. Singh which he denied.

? Statement dated 24-1-2002-Exhibit 19L page 991 Vol.-3.

? He stated that only 22 to 25 labourers were working in the factory of HSG. Any claim by Mukesh Bajpai of more workers was exorbitant.

? That all machines installed were not always working. Some are non-functional; and some are used for manufacturing of gift packing.

? The goods from his factory always were accompanied with bills.

? He was shown two sets of 74 Bills and statements of the employees of Anju Agencies and HSG to which he stated that the statements given by them appeared to be correct.

? Statement dated 6-5-2002 Exhibit 19M page 995 Vol.-3.

? He was shown R-documents to which he stated that these documents did not belong his firm; that these documents have been shown to his computer operator who had also shown his ignorance about it.

? Statement dated 7-5-2002 Exhibit 19N page 999 Vol. 3 ? He was shown statements of Shri Anil Sharma of M/s. Flex Industries wherein he appeared to have stated that they can give lamination of any brand to any one/buyer. He replied that it could not have happened that the lamination of Harsingar was sold to any other firm. If this happened legal proceedings will be initiated against them.

? He flatly denied having received any lamination cleared by Flex Industries on the strength of invoices of various firms.

? He shown the statements of Amrish Kumar Chourasia dated 6-3-2002 to which he stated that they never got manufactured lamination rolls from AVS Rotopack. He stated that only outer bags were got made by them from AVS Rotopack..

(F) SHRI ASHISH KUMAR MISRA, SUPERVISOR OF GOPAL GRINDING * He admitted that goods whatever stored in premises are sent exclusively to HSG after processing..

? He was cross-examined on 8-9-2-001 Page 33-Vol-1 in which he stated that entire day to day affairs of Gopal Grinding Industries were looked after by Ajay Pandey (G) STATEMENT OF SHRI AJAY PANDEY DATED 3-10-2001 EXHIBIT 139- PAGE 5281-5285/ VOL- 15.

* He stated that he prepared challans in computer. Triplicate copy was sent to Gopal Grinding Industries and two other copies were sent to HSG. He was shown copies of 7 challans resumed by Sales Tax department bearing same serial No.6 to which he stated that he was not in a position to explain this fact.

(H) STATEMENT OF SHRI ANJNI KUMAR COMPUTER OPERATOR OF M/S. MAHESH & CO. DATED 26-11-2001 EXHIBIT 68.

He stated that bills were prepared according to his convenience and were handed over in bunch to Shri Mukesh Singh.

That he never received any cash relating to cash sale Bills and he has never met any customer purchasing in cash Shri Anjani Kumar was cross-examined on 8-9-2004 Page 31-32 Vol 1.

He stated that he was sitting in office of the firm located at Subash Marg, Lucknow whereas the godown of M/s. Mahesh & Co. was situated at Iradat Nagar which was 2 KMs from his office.

He stated in his cross-examination that on his arrival in the office Shri Mahesh Singh used to give him a list containing particulars of the quantity and sale price of goods for preparation of computer cash bills and the said list was under the handwriting of Shri Anant Kumar Verma who used to sit at Iradat Nagar.

He accepted that Shri Anant Kumar Verma was cashier cum-Godpwn keeper of M/s. Mahesh & Co. and the bills generated by him used to be passed on to Shri Anant Kumar Verma.

He never stated that supari sold in cash were actually diverted to HSG.

(I) The Statements of various dealers were recorded for which the Chart is being enclosed as ANNEXURE- 5. The dealers were only shown some of the invoices out of 72 invoices which were allegedly provided by the informer and Trade Tax Department. Only two dealers namely Raja Ram Gupta Prop.Gupta Trading Co. and Hari Kishaore Gupta of Papu Sales accepted that they had received 70 bags and 20 bags respectively of Gutkha from Harsingar Gutkha Pvt. Ltd. All others denied having received any consignments on the strength of photocopies of invoices which are part of 72 invoices. Statements of dealers stand enclosed at pages 881/3, 1604 1607/5, 1611-1618/5, 1619-1623/5, 1636-45/5, 1646-1647/5, 1831-1835/5, 1929-1935/5, 5272-5280/15, 5286-5289/15, 5290-5300/15.

? That, it is wholly inexplicable that out of aforestated 72 invoices no statements at all were recorded from two dealers, namely, Sh. Ramesh Chand Jaiswal, Prop of M/s. Jaiswal Stores and Sh. Madhur Mohan, Prop. of M/s. Madhur Mohan Arjun Kumar, still penalties have been imposed upon them. Even where the statements of the dealers were recorded, they were shown only selective invoices. For example, Kamal Kumar Jain was shown two invoices allegedly pertained to them i.e. Invoice No.81269 dated 24-11-99 and 81274 dated 25-11-99 but was not shown invoice No. 130 dated 31-1-2000, 286 dated 1-3-2000 & 272 dated 26-2-2000 which allegedly pertained to them. Though out of 72 invoices there were 11 invoices which allegedly pertained to M/s. Agarwal Zarda Stores of which Smt. Sumitra Agarwal is the Proprietor of this firm. She was only shown invoice No. 607 dated 3-7-2001 but was confronted with alleged 11 invoices for the past period. Similar is the situation with other dealers as would be evidently clear by perusing chart enclosed as ANNEXURE- 5. to these written submissions.

* In any event the learned Commissioner has imposed penalties on these dealers only qua 72 invoices as would be evidently clear by perusing para 55.15 (Page 274) of the Order-in-Original to 55.21 (page 284). Thereafter para 55.42 (page 313) to para 55.50 (page 326 of O-in-O).

* While justifying imposition of penalties on these 16 dealers these penalties have been imposed only with respect to 72 invoices though no statement of them was recorded for majority of these invoices. It is the case of the department all along and also the finding that there were only 16 dealers to whom Patel Brothers and Anju Agency were selling their goods. This fact has also been accepted by the department in their written submissions. Therefore, it has been impliedly accepted that except these 72 invoices no other goods were received by them without invoices. Hence, whole demand of duty should stand quashed.

(VI) THE IMPUGNED ORDER HAS BEEN PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE.

* Though the learned Commissioner was kind enough to allow cross-examination of various witnesses and departmental officers which were conducted before him. However, the HSG had requested for cross-examination of various drivers on whose statements, reliance was placed and discussed in point No. I [please see page 160-162/Vol.-I.] * HSG had also reiterated the request for cross-examination of the drivers and the supervisors at page 286/Vol.1 where the list of persons desired to be cross-examination was furnished to the Commissioner. However, unfortunately there is absolutely no finding by the Commissioner as to why the drivers and supervisors whose cross-examination was sought by HSG were not called/presented for such cross-examination.

(VII) THAT THE VARIOUS STATEMENTS OF THE EMPLOYEES OF HSG AND ANJU AGENCIES/PATEL BROTHERS ARE MATERIALLY CONTRADICTORY; FAVOURABLE PORTIONS FROM THESE STATEMENTS HAVE BEEN TOTALLY OVERLOOKED BY THE COMMISSIONER.

* That, apart from the various submissions on the non-admissibility of the statements of Shri Mukesh Bajpai, Amit Srivastava and Shri Rajnish Tiwari have been made in various other paragraphs but in any event their statements are mutually contradictory in many respects. Whereas Shri Mukesh Bajpai and Amit Srivastava in their respective statements had stated that factory of HSG operated for into two shifts a day. On the contrary Shri Rajnish Tiwari in his statement stated that the factory of HSG runs between 10 A.M. to 6 P.M. Further, Shri Mahesh Singh in his statement dated 11-10-2001 stated that the factory runs two shifts about 3-4 times in a month as per requirement. [Exh.-19-F/Vol.3/Page 977] * Shri Mukesh Bajpai in his statement dated 5-7-2001 (Exb. 10B) stated that the factory had about 40 regular labourers and 70-80 daily wagers. whereas, Shri Mahesh Singh in his statement dated 24-1-2002 had stated that only 22 to 25 labourers were working in the factory and any claim of Shri Mukesh Bajpai or more workers were exorbitant.

* Apart from material contradiction there were the favorable portions of various statements which were totally overlooked by the department and the Commissioner.

* All had denied knowledge of R-Documents but still duty was demanded to the tune of Rs. 30.31 crores on the said R-Documents confirmed by the Commissioner.

* Shri Rajesh Tewari in his very first statement dated 4-7-2001 (Page 180/Vol.3) had categorically stated that delivery of one or two bags were made at their factory gate which were taken by the customer himself. But absolutely, no cognizance of the this very vital aspect was taken note. The Department in sweeping manner demanded duty on all 4557 invoices issued by Patel Brothers and M/s. Anju Agencies for the period 1-4-1998 to 4-7-2001 wherever they had sold quantity of 1,2,3, 5 bags and by treating the same as clearance of 70 bags each.

* Shri Mukesh Bajpai in his statement dated 6-7-2001 (Exh. 10 page 789) had clearly stated that HSG had purchased supari from M/s. Mahesh & Co. in the year 2000-01 about 3,06,060 Kg. and in the year 2001-02 (till 13-6-01 ) about 1,20,775 Kg in cash where there was no voucher. Even assuming for argument sake it is presumed that duty on Panmasala/Gutkha can demanded only on the basis of one raw material still the duty demand on the basis of said quantity of supari during the year 2000-2001 would come to Rs.3,94,27,700.00 and during the year 2001-02 would come to Rs. 2,21,83,286.00. only. Hence in any case total duty demand can by no stretch of imagination can exceed Rs.6,16,10,986.00.

* There is no acceptance by Shri Mukesh Bajpai that HSG had received any unaccounted supari during the financial year 1998-99 and 1999-00. This vital aspect had been totally ignored by the department and the Commissioner.

(VIII) QUANTITIES OF VARIOUS RAW MATERIALS REQUIRED TO MANUFACTURE GUTKHA/PANMASALA; FINDINGS OF THE COMMISSIONER ON THE SAME; NO EVIDENCE THAT ALL THE REQUIRED RAW MATERIALS PROCURED CLANDESTINELY TO MANUFACTURE FINISHED GOODS; FURTHER THE EVIDENCES REGARDING PROCUREMENT OF RAW MATERIAL RELIED UPON BY THE DEPARTMENT ARE HIGHLY INSUFFICIENT

- Raw materials for manufacturer of pan masala/gutkha are supari, kattha, lime, perfume, cardamom, menthol and tobacco. The percentage of these raw materials in the HSGs main product gutkha is as under:

                                          GUTKHA                              SADA PAN MASALA



Supari

Kattha

Tobacco

Cardamom

Lime

Menthol

Perfume

                Total:
70%

14%

10%

2.50%

2%

1%

0.50%

100%
Supari

Kattha

Cardamom

Lime

Menthol

Perfume

                Total:
80%

14%

2.5%

2%

1%

0.50%

_____

100%

In the first place it is submitted that in the instant show cause notice at page 173 the duty has been demanded on alleged non-accounting of supari only and that of finished goods. However, it was alleged that non-accounting of other raw materials viz; Katha, Laminates and cardamom etc. was also noticed. However, a perusal of following submissions and thereafter a consolidated chart would show that there is absolutely no evidence to fasten such a colossal duty demand. These so called evidences of raw materials are either non-existent or highly insufficient.

(A) Supari ? Supari is the main raw material to manufacture gutkha or pan masala, as the case may be.

? At pages 47-49 of the impugned Order, allegations have been made about supari and the findings on these allegations are at pages 198-213.

? At the said pages the Commissioner has held that if supari to the extent held by him was procured by the HSG, such supari was sufficient to manufacturer pan masala and gutkha involving duty liability as mentioned hereafter.

? That in order to manufacture the extent of the gutkha/Pan Masala as confirmed by the Commissioner suprari will be 1.07 crore kgs.

? Even assuming for arguments sake that supari sold by Mahesh & Co. against cash was diverted to HSG still the duty involved on the same is Rs. 22.43 crores.

? Even in that case, there is absolutely no evidence that the same was diverted to HSG.

(B) Re: Kattha:

? Allegations are at pages 52-55 and findings are at pages 219-224. Kattha is another major raw material which is used to the extent of 14%. For duty involvement of Rs. 137.76 crores, requirement of Kattha will be 19.46 lakh kgs. In the Commissioners Order, in respect of Kattha, the entire findings relate to a meager quantity of 99083 kgs and even the said findings are totally perverse. Details of the same are as under :-

? Re: 36121 kgs and 640 kgs (para 47.1 to 27.6 at pages 219-220) Findings in this regard are based on the difference in balance sheet/ stock register/ purchase invoices as compared to the quantities recorded in Form IV Register. This issue is similar to that stated in paragraph V.(A) above in connection with supari and all the submissions made in the said paragraph are reiterated.

? Re: 1000 kgs (50 cases of 20 kg each) (para 47.7 to 27.9 at page 221):

The allegation was that M/s Awadh Wood Products had issued two parallel invoices bearing the same Serial No. 120 dated 21.02.1999. It was submitted by the HSG that it had received the goods under the said Invoice No. 120 only once and there was no evidence at all to show delivery of the goods twice over. In respect of this quantity there was:

? No evidence of receipt by HSG.

? No evidence of payment by HSG ? No question was put to HSG page 221.

? Re: 30165 kgs (para 47.10 to 47.12 at pages 222):

? Cash sales of Mahesh & Company.

? Nothing to show purchase or receipt or payment by HSG.

? Re: 30,013 kgs page 223:

? It was a mistake and was duly rectified.

? Based on some performa invoices and shortage during physical stock taking, there are further allegations about two quantities of 500 kgs and 644 kgs at pages 222 and 223. Even though the HSG fully explained the said allegations, the Commissioner has disbelieved the same.

? Total findings of the Commissioner regarding Kattha relate to the following quantities:

36121 kgs 640 kgs 1000 kgs 30165 kgs 30013 kgs 500 kgs 644 kgs Total: 99083 kgs As stated herein above for manufacturing pan masala/ gutkha involving duty of Rs. 137.76 crores, the requirement of kattha will be 19.46 lakh kgs. As against this, the Commissioners total evidence relate to 99083 kgs and even the said purported findings are totally perverse as stated above.

? For manufacturing pan masala/ gutkha involving duty of Rs. 137.76 crores, the requirement of cardamom will be 4.91 lakh kgs.

? In Para 48 at page 224 save and except a quantity of 7760 kgs, there is no other finding at all in respect of cardamom. Even the said irregularity about 7760 kgs was merely a mistake which was duly rectified after it was detected and the Commissioner has rejected the HSGs submissions in this regard on the ground that the mistake was rectified late and that while rectifying the mistake, no remarks were given explaining the reasons for discrepancy (D) Re: Tobacco page 242:

? Tobacco is another important raw material for manufacture of gutkha. At the HSGs factory, out of its total production, more than 95% was that of gutkha and extent of tobacco used in the manufacture of gutkha is 10%. For manufacturing gutkha involving duty of Rs. 137.76 crores, the requirement of tobacco was 13.76 lakh kgs.

? In the entire order passed by the Commissioner, there is no finding at all about receipt of any quantity of tobacco clandestinely. The HSGs submissions that without tobacco it was simply not possible to manufacture such alleged quantity of gutkha has been ignored by the Commissioner by holding that the adjudicating authority is not required to go into such issues para 53.2/page 242.

(E) Re: Lime, Menthol and Perfume:

? For manufacturing pan masala/ gutkha involving duty of Rs. 137.76 crores, the requirement of these raw materials was to the following extent:

Lime: 2.75 lakh kgs.

Menthol: 1.38 lakh kgs.

Perfume: 0.69 lakh Kgs.

In the entire order, there is no finding at all that any quantity of lime or menthol or perfume was clandestinely received by the HSG.

(F) Re: Lamination:

? Allegations relating to lamination are at pages 56-70 and findings are at pages 224 227 of the impugned order.

? In the impugned Order the Commissioners findings relating to lamination relate to a small quantity and even the said findings are totally perverse.

? Mistake in mentioning Invoice No. 430 in Form IV Register as against correct Invoice No. 434 has not been accepted on the ground that no efforts have ever been made to rectify the mistake.

? In two cases Challan Nos. 417 and 426 were entered in Form IV Register rather than the connected Invoice Numbers 457 and 466. Commissioner has rejected the submissions by holding that no explanation is coming from the party as to why Challans were entered instead of Invoice Numbers.

? A quantity of laminated rolls valued at Rs. 9,18,107 covered by Invoice No. 4023 dated 18.02.2000 was rejected and Credit Note was also issued by the supplier M/s Flex Industries Ltd. It was submitted by the HSG that delivery of this consignment was not taken by it because even at the time of receipt the consignment was in extensively damaged condition. Commissioner has rejected the submission on the ground that the said inspection and examination must have been carried out after entry of goods inside the factory and that the HSG did not produce any transport document etc. showing return of the rejected material.

? There are similar findings about the rejected materials covered by two consignments discussed in Para 49.17 to 49.19.

? The alleged shortage of 4513.798 kgs was fully explained by the HSG. The Commissioner has rejected the submissions by holding that loose rolls already issued for packing were not liable to be counted while counting the physical stock (Para 49.20 to 49.22).

? In another instance, transport document was marked with stamp of Trade Tax Authority dated 04.05.2001 whereas it was entered in Form IV Register against date of 03.05.2001 and it has been taken as multiple receipt of consignment.

? Based on some documents of M/s Flex Industries relating to laminated rolls bearing product name HSG it has been presumed that the goods must not have been supplied to the purchasers mentioned in Central Excise Invoices of Flex Industries who were found to be non-existent and that these must have been supplied to the HSG.

? No evidence whatsoever brought on record in support of the aforestated allegations and findings. The only evidence cited in support of was the statement of one Shri Rakesh Babu Bathom, driver of truck No. MP-30-00/1G-009. He allegedly stated that though the invoice in the name of some other parties but the lamination was to be delivered to HSG. HSG had asked for cross examination of Shri Rakesh whose cross examination was allowed but he never appeared for such cross examination. Hence, his statement could not be relied upon by the Commissioner as the same stood excluded from the evidence. In view of the fact that there is absolutely no evidence on record to show that HSG had received the aforestated huge quantity of each raw material clandestinely, question of manufacture of finished goods as confirmed under various heads cannot arise at all.

? Absolutely no evidence that if consignments of lamination meant for other parties & transported in one truck were actually received by HSG. ? There cannot be any presumption that if on some documents such as loading slips, weighment slips and the corresponding invoices that two consignments of HSG code, one in the name of HSG and the other in the name of non-existent firm and loaded in the same vehicle. (page 234 of Order-in-Original) .

? A perusal of various invoices under which Flex Industries had supplied lamination to HSG would clearly show that in the said invoice Harsingar Gutkha Lam being specifically mentioned. Please see invoices enclosed at Exh. 105/1, 105/3, 105/5, 105/7, 105/10 pages 4321, 4323, 4325, 4327, 4330 Vol. 12.

? The department while preparing Ex105/4321 to 4338 alleged that in the same truck Flex Industries were dividing the consignments of lamination into two parts one consigned to HSG and other to non-existent firm and the Commissioner has confirmed the same. (Page 234 of O-in-O) ? Merely because in one truck the supplier is supplying the lamination to two different parties no presumption can be raised that even second consignment also reached the factory of HSG. In the other invoices meant for other parties- See Exh. 105/2, 105/4, 105/6, 105/8, 105/9, 105/11, 105/12, etc. pages Vol. 12 the expression clearly mentioned as Plastic Packing Laminate which is clearly distinguishable from the expression Harsingar Gutkha Lam ? Similarly even if on a few loading slips of Flex Industries such as Exh. 104/1 to 104/10 pages 4307 to 4315 Vol. 12 corresponding to invoices of Exh. 105 under the Column Name of product HSG Box is mentioned that does not mean that the entire truck load of these consignments was received by HSG.

? In any event of the matter merely on the basis of around 12 loading slips a sweeping finding has been rendered that all the clearances of lamination to 26 parties spread over various parts of the country has been assumed to the diverted to HSG which is absolutely unsustainable.

? In any event of the matter the common loading slips pertained to only about 33 MT of lamination i.e. 33000 Kgs whereas to manufacture Gutkha involving duty of Rs.137.63 crores the quantity of lamination required is 26,43,125 Kgs.

? In this regard statement of Shri Anil Sharma Asstt. General Manager (Commercial) was recorded on 7-1-2002 (Exh. 103A 4277-4284/Vol.12) wherein he explained the mode of clearance of lamination from their factory. He nowhere stated that the entire quantity mentioned in common loading slips was supplied to HSG. Even in his subsequent statements enclosed at Exh. 103B to 103D pages 4285 to 4306/Vol.12) he nowhere stated that the entire quantity of lamination loaded under 12 loading slips were consigned to HSG.

? Another wholly uncorroborated allegation was leveled in the show cause notice that HSG had obtained laminated rolls from Flex Industries in the name of non-existent firms ( Page 107 to 127 of the SCN) . It was alleged that laminated rolls sold to various parties starting with name H were in fact non-existent firms. It was alleged that quantity of 373946.21 Kgs of laminated rolls was routed through HSG in the name of non-existent firms. However, there is no categorical evidence given by the department and no categorical finding rendered by the Commissioner on the aspect. He has merely held that not a single buyer either was produced by Flex Industries or by HSG during the course of investigation and adjudication and there are as many as 26 buyers of Harsingar Gutkha/Panmasala brand which have been found to be non-existent. This finding of the Commissioner is wholly perverse and contrary to records. There is absolutely no evidence brought in the show cause notice that these laminated rolls were of Harsingar brand. The only allegation was with regard alleged diversion of 33 MT laminated rolls by M/s. Flex Industries to HSG on the basis of loading slips.

? In any event no evidence was brought on record that such a huge quantity could have been diverted to or received by HSG. These alleged 26 buyers were spread all over India. No evidence brought on record to show that HSG had made payments for such a huge amounts to M/s. Flex Industries.

? In this regard reliance is placed on the statement of Sh. Mahesh Singh wherein he had categorically denied having received any laminated rolls either from Flex Industries or from AVS Rotopack without accountal or in the name of non-existent firms.

? In any event of the matter, the quantity lamination required to be manufactured gutkha was 26,43,125 Kg. whereas the quantity even as per Departments own case was only 3,73,946 Ktgs including the alleged receipt on account of non-existent firms.. Further, the department has not even relied upon this evidence for demanding duty. They have only relied upon the evidence of one raw material i.e. supari and of finished goods. This evidence stands negated even by perusing Table C&D to show cause notice where the department has calculated separate duty for alleged unaccounted katha and laminated rolls (running page 639 to 641 VOl-2). On the basis of katha their case is that HSG did not pay duty to the tune of Rs. 8,75,05,616 and on the basis of laminated rolls they allegedly evaded duty to the tune of Rs. 24,46,47,334/-.

? There is absolutely no evidence that HSG had paid freight in respect of the said quantity of lamination cleared to other parties.

? Another supplier of printed plastic pouches and PP bags to HSG, namely, M/s A.V.S. Rotopack Pvt. Ltd. had sold its products also in cash to different buyers in Lucknow. The Commissioner has held that since the addresses of the buyers buying from the said manufacturer in cash were found to be fictitious, the goods must have been diverted to HSG.

? The investigating officers had recorded various statements from Amrish Kumar Chaurasya of M/s. A.V.S. Rotopack Pvt. Ltd. such as statement dated 17-1-02, 4573/13, 18-1-02, 4579/13, 2-2-2002, 4580/13, 4-2-02, 4583/3.

? In all these statements Shri Amrish Kumar had categorically stated that they were selling printed plastic bags to HSG and were also selling printed rolls/printed bags on cash basis to various parties who brought their cylinders with them and they were printing the rolls for them.

? However, in his statement dated 6-3-2002, 4585/13, he took a turn around and stated that from 15-10-98 to 3-6-99 they had supplied printed plastic bags and printed rolls to HSG.

? He stated that all 26 companies to whom they had made sales on cash basis were on the direction of Shri Mahesh Singh, MD of HSG. Invoices of A.V.S. Rotopack (P) Ltd. stand enclosed from 4643 Vol. 13 onwards upto page 5135/Vol. 15. Shri Amrish Kumar Chaurasia was cross examined on 8-9-2004-Page 28-29-Vol.1. . In his cross examination he stated that he was repeatedly summoned and his statements were recorded wherein he had stated the correct facts. He stated that his last statement dated 6-3-02 was not correct and the same was given under duress and he had filed retraction letter on 7-3-2002. He stated that his statement dated 6-3-02 was completed at 23.45 hours. The Commissioner has totally ignored the averments of Shri Amrish Kumar Chaurasia given in his cross examination.

? Even going by the allegation made by the department and findings by the Commissioner, it is their case that 33 MT of laminated rolls was diverted by Flex Industries on the basis of loading slips. According to department around 26 MT of laminated rolls was not accounted for by HSG. Further, around 13 MT of laminated rolls were allegedly supplied by AVS Rotopack during November, 1998 to March, 2000 in the name of non-existent firms. Though, HSG has rebutted each and every allegation with regard to non receipt of any unaccounted laminated rolls but even adding all these three quantities the same comes to only around 72 MT as against requirement of 26,43,125 KGs.

? No explanation whatsoever has been given either in the show cause notice or in the Order-in-Original or during arguments or in their written submissions that in the absence of receipt other vital raw materials proportionately such as katha, cardamom, lime, menthol, perfume and laminated rolls now HSG could evade such a huge amount of central excise duty.

? Even in respect of supari, even if it is assumed that Mahesh & Co. allegedly diverted suparai to HSG after reducing the quantity of wastage to the tune of 10%, the duty demand would stand reduced to Rs. 19,50,22,305 instead of Rs. 22,43,58,638/- as confirmed by the Commissioner.

? As regard the duty demand on crushing of suparai by GGI there is absolutely no evidence at all that this quantity was received by HSG but still the duty demand along with other raw materials has been confirmed. But in any case the duty demand confirmed is only to the tune of Rs. 18,18,84,268/-.

? Hereunder HSG is explaining in tabulated form the quantity of raw material required and allegations leveled by the department for unaccounted of some of the raw materials:

Sr No. Name of Raw Materials Quantity received to manufacture Gutkha involving duty Quantity for which evidence relied upon by the Department 1 Supari 1.07 crore Kgs

(i) 14,08,621 Kg on the alleged ground that Mahesh & Co. had diverted Suparti to HSG during the period 1998-99 to July 2001.

(ii) 10,36,410 Kg of Supari allegedly grinded by GGI which was not accounted for by HSG. Total quantity 24,45,031.

Katha 19.46 lakhs kgs 99083.00 kgs 3 Tobacco 13.76 lakh kgs no evidence; findings at para 53.2 page 242 of O-in-O 4 Lime 2.75 lakh kgs No evidence/no finding 5 Menthol

1..38 lakh kgs No evidence/no finding 6 Perfume 0.69 lakh kgs No evidence/no finding 7 Lamination 26,43,125.00 Kgs..

72000.00 Kgs * There was an allegation that 6500 kgs. of katha was received clandestinely from Indian Wood Product, Barelly in the year 1999-2000 and 2000 kgs. was received from them in the year 2000-2001. Even assuming for argument sake that this quantity was allegedly diverted by the said Indian Wood the duty demand on the finished goods based on one raw material i.e. cardamom would come to Rs. 60,24,857/- only.

(IX) SUBMISSIONS IN RESPECT OF DUTY DEMAND OF RS. 63.97 crores:

? As stated above, the duty demand can be divided into two parts:

? On 72 invoices demand of Rs. 85.77 lakhs confirmed and remaining demand has been confirmed on the reconstructed invoices which are 4557 in numbers.

(A) SUBMISSIONS ON THE DUTY DEMAND OF RS. 85.77 LAKHS I.E. ON 72 INVOICES.

? Departments case is that out of 74 invoices provided by the informer and Trade Tax Department (56+18) quantity in two invoices matched with the original invoices Exh. 21/1 to 21/72. P. 1433-1505, Vol.4 ? In remaining 72 invoices according to department the quantity was reduced in the computer of Patel Brothers and Anju Agencies to 1 to 5 bags.

? No reliance can be placed on such invoices as these were only photo copies.

? No details as to when the informer or the Trade Tax Department had handed over these invoices to the department.

? No proper panchnama or covering letter for taking over the said documents.

? No presumption under section 36A available in respect of the said 72 invoices as the same were not produced by HSG or seized from the custody or control of HSG.

? Burden of proof was squarely on the department to prove the genuineness of these photo copies.

? These 72 invoices appeared to be fabricated ones; No date of tendering of the same to the department available; No explanation forthcoming as to why the informer was keeping these invoices for such a long time with him that too only photo copies; No explanation where are the originals of the said photocopies. None of these invoices were found in the premises of HSG or Anju Agencies or the buyers.

? It is an admitted position that Anju Agencies or earlier Patel Brothers were having only 16 dealers in and around Lucknow where the factory of HSG is situated.

? Fabricated nature of these invoices stands clearly established as no evidence to link the same with dealers proved. Out of these 72 invoices, the dealers were only shown 12 invoices. Rest of the 60 invoices were never shown to the dealers. In this regard a charts have been enclosed as Annexures 4 & 5 which show the details of the 72 invoices and whether shown to the respective dealers or not. Out of these 14 dealers only 2 dealers, namely, Hari Krishna Gupta, Shiv Kumar Gupta of Papu Sales and Shri Raja Ram Gupta of Gupta Trading Company had accepted having received the bags shown in the said invoices. They in their respective cross examination (page 21-22/Vol.1 and page 30/1) clearly stated that the statements were given by them were under pressure exerted by the investigation officers.

? A perusal of alleged comparison of the invoices retrieved from the computer with 74 invoices in possession of the department reveal that at least 17 invoices were issued under the signatures of one Sh. Jayant Mishra allias Rajan. However, no statement of the said Sh. Jayant Mishra allias Rajan was ever recorded. It is an admitted position that prior to August 1999 it was Sh. Jayant Mishra allias Rajan who was issuing the invoices on behalf of Patel Brothers. If prior to August, 1999 Sh. Jayant Mishra allias Rajan was issuing the invoices, it was incumbent upon the investigating officers to have summoned Sh. Jayant Mishra allias Rajan. It was only Sh. Jayant Mishra allias Rajan who could have only stated as to whether prior to August, 1999 whether he was making any editing of the invoices in the CPU of Patel Brothers including the quantity and other details.

? In his statement Sh. Rajnish Tiwari stated that he had joined Patel Brothers w.e.f. August, 1999. However, invoice mentioned at S.No. 1 issued by Patel Brothers for the year 1999-2000 i.e. invoice No. 316 dated 31-05-99 is stated to have been issued by Sh. Rajnish Tiwari. Similar is the situation with regard to invoice No. 334 dated 3-6-99 mentioned at S.No. 2. It is inexplicable as to how Sh. Rajnish Tiwari could have issued these two invoices when he was not in the employment of Patel Brothers. These aspects needed to be clarified by the department during the investigations.

? That, no reliance can be placed on the various statements of the drivers or the supervisors as they had stated in a generic way that in a truck they were normally transporting 70 bags. This averment of the drivers and supervisors could not be accepted on its face value as they were not confronted with 72 invoices where the quantity ranged from 15 to 150 bags and only in 15% cases the quantity was 70 bags. In fact, they were not even shown a single invoice either of higher quantity or of reduced quantity.

? It is very strange that when the 12 of the 14 dealers had denied having received the goods on the said invoices and when two of the 14 dealers had retracted from their statements in cross examination how the Commissioner could still confirm the demand on the said 72 invoices.

? The dealers were also not shown the allegedly retrieved invoices showing a quantity of one to five bags at any stage.

? It appears that the investigating offices deliberately chose not to show majority of the invoices to the dealers.

? In the case of Aggarwal Zarda Store Store there were 12 invoices they were only shown one invoice. In the case of Aggarwal Traders there were 19 invoices but Shiv Kumar Agarwal was only shown one invoice dated 3-7-01; In the case of Sudhir Chand Gupta there were 16 invoices but he was only shown one invoice No. 607 dated 4-7-2001 and so on.

? These invoices were of Patel Brothers and Anju Agencies. They were buyers of HSG, hence, duty could not be demanded from HSG on the basis of third party documents.

? There is nothing on record to show that the said invoices related to any clandestine manufacture and clearances from HSG. Even these invoices were mere photo copies relating to scattered period; there is nothing to show how the invoices raised in 1999 allegedly preserved by the informer for several years and supplied to the department in the year 2001.

? Buyers denial had been discarded by the Commissioner by holding that the same do not appear to be correct (page 28 top).

? It is very strange that statements of two dealers Shri Ramesh Chand Jaiswal Prop. of Jaiswal Steels and Madhur Mohan Arjun Kumar were never recorded but still penalty has been imposted upon them.

? The fact that the Commissioner himself has not accepted the genuineness of these invoices as he has confirmed the duty demand by taking 70 bags as covered by one invoice whereas actually the quantity of bags of each invoices varied from 15 to 150 bags. In this regard, a chart is enclosed as ANNEXURE-6 which will show that it was only in 12 cases the invoices show the clearances of 70 bags which comes to around 15% of the total clearances on the purported 72 invoices. Therefore, the theory propounded by the department that the HSG was clearing invariably 70 bags and reducing the quantity to one to five bag is completely false, fabricated, made up and cock and bull story.

? Even the Commissioner appears to have not accepted the genuineness of these invoices as he has reduced the demand from Rs. 87,77,000.00 which was the sum total of all the bags i.e. 4935 whereas he has taken 70 bags in each invoices and has reduced the duty from Rs. 87,77,000.00 to Rs. 85,77,000.00 and has held actual number of bags applying the above formula to be 4765 bags (para 30.47 Page 132 of Order-in-Original. .

? Even the Commissioner has gone with the theory of 70 bags as propounded by the department while recording the statements and while issuing the show cause notices which means even the Commissioner has not accepted the veracity and genuineness of 72 invoices.

? The Commissioner has erroneously held that average method of taking 70 bags per invoice was logical and acceptable. Page -118 and 121 of O-in-O. ? Such a method of confirming duty demand is wholly unknown in quasi-judicial proceedings.

? It would also show that the investigating officers had recorded the inculpatory statements in a tailor made fashion solely relying on their intelligence that each consignment shown by Anju Agencies or Patel Brothers was of 70 bags but the quantity was subsequently reduced to one to five bags.

? This purported intelligence was also extended to the clearances made by Patel Brothers though they had closed down their operation w.e.f. 31-12-1999.

? HSGGGGNone of these invoices were of HSG. These were not seized from the HSG factory or office premises.

? There was no enquiry about as to how much quantity of final products was purchased from the HSG by Patel Brothers and Anju Agencies and how much quantity was sold by them and as to whether the quantity covered by these invoices was within the purchased and sold quantities or not.

? Corroboration is sought to be derived for this demand by some alleged irregularities about consumption of petrol/diesel in movement of about 5-7 trucks Page 28.

? Reliance has been placed on various statements such as of Sh. Mukesh Bajpai, Rajesh Tiwari, Amit Srivastava and of drivers of vehicles in support of findings that HSG used to clear 70 bags and subsequently quantity used to be reduced to 1 to 5 bags.

? No reliance could be placed on the statement of Mukesh Bajpai as he died during adjudication proceedings and could lnot be cross-examined.

? In any event statement of Shri Mukesh Bajpai was involuntary as it is evidently clear by perusing an affidavit dated 16-7-2001 sworn by Shri Mukesh Bajpai. This affidavit was found in the copies of documents which was supplied by the department to HSG. This submission was specifically made in a letter dated 16-01-2004 by the counsel- please see page 293 to 296/Vol-1. This submission has been made at page 294. The said affidavit stand enclosed at page 297 to 300/Vol.1. In this affidavit late Shri Mukesh Bajpai had stated that his statements dated 04-07-2001, 05-07-2001 and 06-07-2001 were recorded by putting extreme pressure, duress, mental torture and coercion and he was forced to write whatever was dictated to him.

? Despite having made submissions on this affidavit there is no finding by the Commissioner on this vital aspect of the matter.

? Even the Revenue in their various written submissions have not controverted these averments of Shri Mukesh Bajpai. Once it is proved that the statement of Shri Mukesh Bajpai was under extreme pressure, threat and coercion no reliance can be placed on the same. Even otherwise, his statements are mutually contradictory in nature.

? The Honble Apex Court in the case of Parle Beverages Pvt. Ltd Vs. Collector of Central Excise, Bombay, reported in 1998 (98) ELT 585 (S.C.) has held that the evidentiary value of affidavit cannot be brushed aside solely on the ground of delay. The department is bound to go into the probative value of the statement made in the affidavit. Copy of the judgment is being enclosed in a separate compilation. Hence even if Shri Mukesh Bajpai could not be cross-examined due to his demise, no significance can be attached to his various statements.

? The admissibility or evidentiary value on a statement of a witness who could not be examined because of his death came in for consideration before the Hon;ble Andhra High Court in the case of Somagutta Sivasankara Reddy And Vs. Palapandia Chinna Gangappa and judgment to this effect was rendered on 23rd November, 2001. It may be pertinent to state here that the Honble High Court was interpretating the provisions of Section 33 of the Evidence Act, 1872 which is para matria Section 9D of the Central Excise Act. The Honble High Court after taking a number of judgments held as under :-

We, therefore, are of the opinion that the evidence of a person who has died after examination in chief and as by reason of his death, he could not be produced for cross-examination, although his evidence is admissible in evidence, the weight or probative value thereto would vary from case to case and in a given case may also be disregarded. Copy of the judgment is being enclosed in a separate compilation of the case law.

? In the present case the HSG has proved beyond doubt that the various statements of Shri Mukesh Bajpai were not based upon the correct facts and were contradictory to one another and also contradictory to various other statements. Hence, despite the fact that he could not be cross-examined no reliance can be placed on his various statements.

? As regards Rajnish Tiwari, he did not turn up for cross-examination on the ground that he was a co-noticee page 12/1 ? Cross-examinatino of drivers and Supervisors was asked but not allowed by the Commissioner for unknown reasons.

? Cross-examination of Amit Srivastava conducted Page 23/1 wherein he stated that statements were recorded from him after putting pressure on him.

? The case set up by the Department that during the entire period in question there used to be superimposition in respect of all the invoices on the basis of which Patel Brothers or Anju Agencies is wholly false.

? In fact Shri Rajneesh Tewari in his statement dated 4-7-2001 had stated that he was doing editing of the invoices only for the last two months. Prior to that he was deleting the records. This statement even taking on its face value does not support the case of the department. In such a case the department should have retrieved the invoices of Anju Agencies and Patel Brothers prior to the two months period and should have relied upon the same in the Show Cause Notice as it their own case that deleted records/invoices could be retrieved.

? In fact if there would have any editing of the invoices the stellar would have been in a position to opine that the purported editing of a particular invoice/invoices was done on which date. In this regard detailed submissions are being advanced in the next point.

(IX-A1) THAT NO PRESUMPTION ABOUT THE TRUTHFULNESS OF THE DOCUMENTS PROVIDED BY AN INFORMER OR HANDED OVER BY THE TRADE TAX AUTHORITIES.

? No source of acquisition of the photocopies of 72 invoices have been given except to the extent of 56 photocopies were provided by the informer and 18 copies were provided by the Trade Tax department.

? No reliance could have been placed on such type of evidence on twin grounds. Firstly the photocopies were not seized from the premises of HSG and these invoices do not pertain to HSG and secondly these were only photocopies. In these circumstances the truthfulness of the documents cannot be accepted. Even otherwise the presumption under Section 36 A of the Act is not available in the present case.

? If the Revenue wanted to rely upon these invoices in a legal and transparent manner the onus was on them to have clearly spelt out source of its acquisition. Reliance is placed on the judgment of the Honble Apex Court in the case of Tukaram.S, Dighole vs. Manikrao Shivaji Kokate, reported in 2010 4 Supreme Court Cases 329 and also Ashwin S. Mehta Vs. Commissioner of Customs, Mumbai, reported in 2006 (197) E.L.T. 386 (Tri.-Mumbai). Similar view has been taken recently by this Tribunal in the case of Pan Parag India Ltd. vide Final Order No.621-625/2012-EX(BR) dated 23-5-2012. Copies of all the three judgments stand enclosed in the complication of the case law.

? In any event the documents provided by an informer have to be viewed with great circumspection as an informer is an interested party who has some axe to grind. Therefore, no blind reliance can be placed on documents provided by the informer. Further, there is no justification on record as to how the Trade Tax department got hold of 18 photocopies of invoices. It is not the job of the Trade Tax department to keep photocopies of some documents. No doubt that Trade Tax authorities have jurisdiction to verify the genuineness or otherwise of any transactions but it is not their job to keep photocopies of any invoice.

? Hence, 72 copies of invoices have absolutely no evidentiary value in the eyes of law.

(B) SUBMISSIONS ON DUTY DEMAND OF RS. 63,12,08,850/- ON 4557 INVOICES-

PAGE 130 ? In the first place the department has absolutely not given any evidence that HSG had received proportional quantities of various raw materials clandestinely or without accountal such as Supari, Katha, Tobacco, Lime, Menthol, Perfume and Lamination to enable them to manufacture Gutkha/Panmasala and remove the same clandestinely.

? When the department has demanded duty on single raw material i.e. Supari as discussed in para XI & XII & IX of the present written submissions and no further evidence has been given about procurement of other unaccounted raw material question of confirmation of this duty demand could not arise.

? This submission is without prejudice to the fact that even there is no evidence that HSG had procured any quantity of Supari clandestinely.

? Further there is no evidence at all of procurement of other vital raw materials which are essentially required to manufacture finished goods.

? The confirmation of this duty demand is purely on the basis of the invoices of sole selling agency, namely, Patel Brothers and Anju Agencies.

? This duty demand is purely on the basis of purported intelligence that Anju Agencies were clearing 70 bags under each invoice and the same was being reduced to one to five bags in their computer.

? This duty demand is based upon allegedly re-construction of deleted data in the hard disk of CPU data of Anju Agencies and Patel Brothers. It has been alleged that 4557 invoices for the period 1998-99 to 2001-02 were re-constructed. The Commissioner has held that on the basis of the quantity shown in 72 invoices the quantity shown as one to five bags in those 4557 invoices were not correct and hence quantity of each invoice must be taken as 70 bags. However, the copies of these purported 4557 invoices have neither been relied upon in the show cause notice nor copies of the same provided to HSG.

? This duty demand is a merely on the basis of charts enclosed at pages 23-89/ Vol. 18.

? The quantity of each invoice raised by Anju Agencies and Patel Brothers from one to five bags to 70 bags has been tabulated in the said chart which has been described as altering figures as per intelligence. This is the sole basis of the said huge and exorbitant demand more than Rs. 63 crores.

? Findings of the Commissioner to this effect are in para 30.45 page 130 of the Order wherein the Commissioner has held that the demand was worked out for the period in question on the basis of editing of original entries of quantities, value and consignee of actual sales in the sale invoices of Patel Brothers and Anju Agencies ? In the entire Order there is not even a word as to what are the other documents supporting any such demand and in fact there are none.

? It is very strange and intriguing that when the officers visited the premises of Anju Agencies on 04-07-2001 they did not seize the hard copies of the invoices which included 4557 invoices though the same was very much available in the factory. In this regard reliance is placed on the panchnama of Anju Agencies Exhibit No. 3 Page 865/Vol.2. Though the investigating officers seized numerous documents but the same did not include the hard copies of the invoices issued by Anju Agencies. They also did not try to find out the location of invoices issued by Patel Brothers issued by them upto 31-12-99.

? It is wholly inexplicable as to why there is neither any reference to the said invoices in the panchnama nor in the various statements of the employees of Anju Agencies like Shri Rajneesh Tiwari or its owner.

? There is not even a reference to hard copies of the invoices anywhere in the entire investigation and no explanation is forthcoming as to why copies of these invoices were not seized. No explanation is forthcoming as to why the copies of the said invoices were not retrieved from the CPU of Anju Agencies and Patel Brothers and were not compared with hard copies which were lying in the premises of Anju Agencies.

? No explanation is forthcoming as to why the department chose only to retrive so called 72 copies of edited invoices but not all the 4557 invoices on the basis of which there is very huge duty demand of Rs.63.97 crores.

? As per stellar report dated 2-5-2002 Exhibit No. 38 Page 1938-1941/Vol.5 the original data which had been later superimposed it was not possible to read original data in that case. If that is the case how the copies of 72 invoices were allegedly retrieved and relied upon in the show cause notice since as per the said report such data could not be retrieved. It is departments own case that the quantities in the said invoices were altered by superimposition hence the same could not be retrieved. Copies of such retrieved copies stand enclosed at Exhibit 25/1 to 25/72 pages/Vol. 4 & 5. In fact these allegations and findings run contrary to the statement of Shri Rajneesh Tiwari dated 4-7-01 P-812 Vol 3 wherein Shri Rajneesh Tiwari had stated that he started editing the invoices only from the last two months. He categorically stated that earlier he used to delete the invoices from the computer of Anju Agencies. Though this statement is factually incorrect in as much as HSG never indulged in clandestine removal but even assuming for argument sake that the statement is correct still the deleted invoices should have been retrieved by the department out of 4557 invoices and should have been relied upon in the show cause notice as it has been done in the case of 72 invoices.

? As stated above, the hard copies of the invoices were very much available on 4-7-01 and the same should have been seized by the investigating officers. It was their bounden duty to compare the same by retrieving these invoices from the CPUs of Anju Agencies or Patel Brothers as the case may be. There is absolutely no evidence that the hard copies which were available in the premises of Anju Agencies on 04-7-2001 were deleted copies or edited copies. These were the office copies which were taken out as such from the computer of either Anju Agencies or Patel Brothers and were physically available on the said date. It is not the case of the department that the 4557 invoices which were lying in the records of Anju Agencies and Patel Brothers were taken out after editing or deleting the quantity under which the goods were sold by either Anju Agencies or Patel Brothers. Sample copies of these invoices have been enclosed in Vol No.22 which has been filed separately before the Honble CESTAT. All the office copies in original are available and would be shown at the time of hearing of the present appeal.

? The case of the Revenue and finding of the Commissioner that Anju Agencies or Patel Brothers were generally transporting 70 bags of panmasla/gutkha and after the consignment reached the destination the two copies of the invoices were received back in the premises of Anju Agencies or Patel Brothers and thereafter reduced to one to five bags in the CPUs falls flat in view of the fact that during the disputed period both Patel Brothers and Anju Agencies had at least cleared 472 consignments to their dealers where the quantity of bags per consignment was in double/triple digits. In this regard a chart is reproduced below :

Sr. No. Quantity of bags sold against each invoice Number of consignments cleared during the disputed period containing bags in double/triple digits 1 100 49 2 90 14 3 88 1 4 85 1 5 80 31 6 75 5 7 70 36 8 65 1 9 60 26 10 50 64 11 45 1 12 40 55 13 36 1 14 35 31 15 30 60 16 25 14 17 20 43 18 15 19 19 10 20 TOTAL 472 Copis of these invoices showing the said clearances stand enclosed in Vol. No.21.

? Therefore, the theory propounded by the department and affirmed by the Commissioner that Anju Agencies or Patel Brothers invariably cleared 70 bags under each consignment completely falls flat and stands falsified.

? There is absolutely no discussion on these invoices of varying quantity from 10 bags to 100 bags either in the show cause notice or in the order-in-original. There invoices were also available in the premises of Anju Agencies at the time of search but were never seized by the officers for the reasons best known to them.

? HSG is also enclosing the copies of the invoices issued by them to Anju Agencies and Patel Brothers during the disputed period. The same stand enclosed as Vol No.19 & 20. These invoices fully tally with the stock register of Anju Agencies and Patel Brothers. (pages 1729 to 1928/Vol. 5).

? There is neither any allegation nor evidence or finding that the figures given in the RG-1 register of HSG or stock Register of Anju Agencies or Patel Brothers are incorrect or that HSG had cleared more quantity of finished goods than shown in their RG-1 register or stock register of Anju Agencies or Patel Brothers.

? There is absolutely no evidence of any actual sale and the entire demand is nothing but merely based on surmises and conjectures. Such a huge demand has been confirmed in a most cursory manner and without bringing an iota of evidence in corroboration in support of the same.

? It is an admitted position that Anju Agencies and Patel Brothers were having 16 dealers only. Full particulars of these dealers were available with the department and the majority of these dealers have also been made parties in the instant show cause notice but only with regard to 72 invoices as aftermentioned. Their statements were also recorded only with regard to a very few of the 72 invoices only as stated above. There is neither any statement from HSG or Anju Agencies, and Patel Brothers nor from these dealers in respect of such a huge duty demand of more than Rs. 63.97 crores in respect of 4557 invoices.

? There is absolutely no indication in the show cause notice as to who the purchasers of these goods were, how the goods were transported to them and how such a huge amount of cash was received by Anju Agencies or Patel Brothers and how the said cash flowed back to HSG.

* The case set up by the department that there was superimposition of data in the computers of M/s. Patel Brothers upto 30-1-1999 and M/s. Anju Agencies w.e.f. 01-01-2000 by way of editing the quantity of number of bags i.e. by way of reducing the same and also deletion of other details is wholly incorrect and unacceptable as Stellar though gave a report that there was large number of files which had been destroyed/deleted or overwritten by the computers were seized. But they did not provide/give particular dates when these files were overwritten or edited when it is technogically required to provide such dates.

* Further Stellar did not provide any details as to in which of the CPUs the data was destroyed or deleted and in which of the CPUs the same was overwritten, hence the said report does not command any evidentiary value.

* It is the known fact that there are six levels of memory in the hard discs and therefore an information which was written and then rewritten upon more than 5 times could still be retrieved from the subcutaneous memory of the hard discs. Even if there is a doubt whether that entire information can be reconstructed, certainly the information to the effect that the memory in the hard disc has been written and rewritten upon for over six times would be available. It is possible to analyze a hard disc with the help of a software programme; to find out on what date the information was first written with the exact time of such change. It is possible to retrieve such information in respect of each of the occasions when such information is removed and reinserted or changed on the hard disc. This position has been accepted by the Honble Delhi High Court in the case of Dharambir vs. Central Bureau of Investigation vide its order dated 11/3/2008. Copy of the judgment is being enclosed in a separate compilation. Attention is drawn to para 8.8 and 8.9 of this judgment where this technical aspect has been discussed in detail.

? That in order to corroborate their allegation about transportation of Gutkha on 72 invoices of various dates it has been alleged that on the said dates cash memos were issued for purchase of diesel from various petrol pumps. In this regard source documents have been relied upon as Exhibit 40 (i), (ii) & (iii) ^ 41/1 to 41/8 enclosed at pages 1974 to 1994 Vol. 6.

? But merely buying diesel on the dates on which 72 invoices were issued does not mean that the said vehicles wre used for transportation of Gutkha in clandestine manner.

? In any event question of transportation of Gutkha in clandestine manner on the strength of 72 invoices does not arise as originally 12 dealers out of 14 denied having received goods on the said invoices and the remaining two denied having received the same in their cross-examination. Further no statement from two dealers were recorded at all.

? The department had seized stock register of Anju Agencies and Patel Brothers (pages 1729 to 1928 of Volume 5). In the stock Register, full details of the sale bills of the said parties upon their buyers were mentioned Invoice-wise. In the Stock Register, whatever quantities were purchased by the said parties from the HSG, the same were also recorded along with purchase bill numbers and dates. These details of the goods sold by the HSG to the said parties also fully tallied with their statutory records maintained at its factory. Nothing wrong has been found about the said Stock Register of Anju Agencies and Patel Brothers vis-`-vis the HSGs RG-1 Register and Excise Invoices.

? In the show cause notice, in respect of the quantity covered by this demand relating 4557 invoices involving duty demand of Rs.63.97 crores there were no allegations against the dealers. They have also not been made party to the proceedings, in the respect of the alleged clearances of 70 bags on the basis of 4557 invoices. .

? The statements at pages 23-89 of Volume 18 were based on the data allegedly got reconstructed by the department from out of the deleted data of the hard disk of computers of Anju Agencies and Patel Brothers. Even these computers were not the HSGs computer nor were these seized from the them.

? Even otherwise, as would be clear from the Stock Registers of Anju Agencies and Patel Brothers, their buyers were buying varying quantities such as 1 or 2 or 3 or 4 or 10 or 60 or 80 or 100 bags etc. It would be relevant to mention with regard to the aforesaid that on the date of search (i.e. on 04-07-2001) itself the Central Excise Authorities recorded the statement of Rejneesh Tiwari of M/s. Anju Agencies. In the said statement he clearly stated that delivery of one or two bags is made at their factory gate which is taken by the customers themselves (page 810 of Volume 3). Whatever quantity was sold by them under a particular sale bill, it was mentioned in the stock register against such sale bill. These quantities are the same as were found in computer retrievals of the deleted data. There is absolutely no basis or material or evidence of any nature whatsoever to increase the said quantities to 70 bags per invoice and then assume as if Anju Agencies or Patel Brothers must have sold under each invoice a quantity of 70 bags and that in turn such alleged quantity of 70 bags per invoice must have been manufactured and cleared from the HSGs factory clandestinely. This is a mere surmise, conjecture, wholly baseless and unfounded assumption and presumption.

? The chart enclosed as ANNEXURE- 6 itself shows that even in respect of 72 invoices only in 12 cases the invoices showed clearance of 70 bags. In other 60 invoice quantity ranged from 15 to 150 bags.

? It is solely on the aforesaid assumptions and presumptions that the said demand of about Rs. 63.97 crores has been raised in respect of a total number of 4557 invoices of Anju Agencies and Patel Brothers for a period of four years from 1998-99 to 2000-2001 and the said entire demand is wholly illegal and invalid.

? Even otherwise, the data retrieved from the computer of M/s. Patel Brothers and M/s. Anju Agencies could not be used against HSG unless the department would have brought independent and corroborative evidence to prove the authenticity of the said data. It is well settled law that no reliance can be placed on third party documents unless it is established beyond doubt that the said data is genuine and is independently corroborative in all material particulars.

? That, while confirming the demand of Rs.63.97 crores, the same could not be confirmed merely on the basis of purported intelligence. The duty demand could be confirmed only if there was independent, corroborative, tangible and acceptable evidence on record clearly pointing towards clandestine clearance.

? That, even assuming for argument sake that there was some clandestine removal on the part of HSGs duty could be confirmed only where there would have been a clear link amongst various parties as to from where the HSGs procured unaccounted raw materials of such a hug magnitude, converted the same into finished goods and cleared the same without payment of Central Excise duty to Patel Brothers or Anju Agencies.

? That there is absolutely no material or evidence of any nature whatsoever to assume that either M/s. Anju Agencies or M/s. Patel Brothers had cleared 70 bags per invoice but the issued invoices only for 1 to 5. There is nothing to link the HSGs with the said excess clearances allegedly by resorted to by M/s. Anju Agencies or M/s. Patel Brothers.

? The finding of the learned Commissioner about retrieval of data showing sale of 70 Gutkha bags under each invoice is solely based on the alleged secret intelligence provided to the department by an informer, which is not legally sustainable. There is neither any opinion of M/s. Stellar Information Systems Ltd. nor of any other expert about any retrieval of original data recorded in the computer to be 70 bags of Gutkha and data existing in the computer showing sale of only 1 or 2 or 3 or 4 or 5 bags being not originally recorded one. .

? The learned Commissioner has rejected the HSGs defence plea on the ground of non-mention of any truck No. in the sales invoices in question and the depositions of some truck drivers that they never carried one or two or even 5 bags in the truck.

? No CPU of Patel Brothers was seized at any point of time; CPU of only Anju Agencies was seized; It is nobody case that CPU of Anju Agencies was the same which was earlier used by Patel Brothers.

? No name of any dealer pointed out as to whom the sale was made on the basis of 4557 invoices. It is not the case of the department that sales were made to more than 16 dealers out of which statements of at least 14 dealers were recorded in respect of a few of the 72 invoices.

? No evidence brought on record that HSG had received proportionate quantity of unaccounted raw material, converted the same into finished goods and cleared the same to Patel Brothers or Anju Agencies without payment of duty.

? In fact, all the dealers had categorically stated that they were making payment to Anju Agencies by demand drafts. If there would have been any truth in the case set up by the department, huge amount of unaccounted cash would have changed hands during the period of dispute which runs into more than 3 years. No dealer at any stage accepted that they ever paid cash to Anju Agencies or Patel Brothers in respect of 4557 invoices or for any other receipt of goods. There is also no evidence that Patel Brothers or Anju Agency in turn passed on any unaccounted cash to HSG.

? There is also no evidence on record to show that any unaccounted cash transaction took place between HSG and their raw material suppliers.

? There is no evidence that Anju Agencies and Patel Brothers had received unaccounted finished goods equal to the clearance of which the duty has been demanded on 4557 invoices.

? Duty has been demanded on 4557 invoices in a highly perverse manner and by twisting the various evidences and statements.

? The fact that out of 74 invoices no editing was found in two invoices itself shows that Anju Agencies and Patel Brothers were selling one to three bags as well as 70 bags to their dealers.

? If the editing was actually done invariably by Anju Agencies and Patel Brothers, the same would have been done even in respect of the two invoices which were part of 74 invoices a fact sufficient to establish that M/s. Patel Brothers and M/s. Anju Agencies were selling 1 to 5 bags as well as bags in double digits.

? If the Anju Agencies or Patel Brothers used to destroy the original copies of invoices, there is no explanation as to how 74 copies were retained and by whom.

? No dealer has stated anywhere that they used to send the original copies of the invoices back to Anju Agencies or Patel Brothers. They were not even queried on this vital aspect. As stated above there is no statement of any dealer in respect of 4557 invoices.

? In view of the above, there is no justification to sustain the duty demand of Rs.63.97 crores.

? On the contention of HSG that none of the 4557 invoices have been provided to them nor these have ever been retrieved from any CPU Commissioner has held that these invoices had already been edited in the records after receipt of both the copies of the sale bills as such their recovery was not possible. P-117 of O-in-O. Such a finding is totally perverse and contrary to the statements and other evidences.

* It is the department own case that all the consignments were transported on the following eight vehicles:

(i) UP 32 T/5917 (Tata 407)

(ii) UP 32 T/9879 (Mini truck)

(iii) UP 32 Z/2178 (Tata 407)

(iv) UP 32 T/7220 (Mini Truck)

(v) UP 78 N/0664 (Tata 407)

(vi) UP 32 Z/7044 (Tata 407)

(vii) UP 32 Z/1721 (Delivery Van)

(viii) UP 32 Z/2464 (Delivery Van) * The drivers or supervisors or any other person were not confronted with the alleged 4557 invoices to know from them as to whether they had loaded allegedly 70 bags on the strength of all these 4557 invoices as they would have been the best persons to tell the correct facts as to whether during the period April 1998 to 4-07-2001 they had invariably loaded 70 bags on these trucks. These drivers were also not confronted with R-Documents and no statement recorded from them on the same.

* The theory of 70 bags being transported on these delivery vans would in any case falsify as some of the vehicles out of the aforestated eight vehicles were not even capable of transporting 70 bags such as vehicle No. UP 32 Z/1721 (Delivery Van) and UP 32 Z/2464 (Delivery Van) were Vikrams which had capacity to take only 35 bags. In his statement dated July, 2001 Sh. Amit Srivastava has informed the department that the goods were being transported on Fleet of 6 TATA 407, one truck and two Vikrams. The carrying capacity of Vikram is 35 bags. In any event, the question of carrying 70 bags for all the time did not arise.

* That, there is no truth in the allegations and findings that M/s. Anju Agency or Patel Brothers were purchasing unaccounted diesel from various filling stations under the name of Gobind Singh or Gopal Singh or any other name. There is no evidence that these vehicles were being exclusively used for transportation of gutkha only. There is evidence on record to show that these vehicles were also used for transportation of cut supari and other raw materials.

* In any event of the matter, this evidence of alleged purchase of fuel in the name of non-existent persons has been furnished only with regard to 27 of the 72 invoices. If there would have any truth in the case set up by the department there would have been evidence about the 4557 invoices on which it is the case of the department that Anju Agency or Patel Brothers invariably transported 70 bags. No such chart has been relied upon or produced by the department. Similarly in respect of the alleged clearances on the basis of R documents there is absolutely no evidence at all the HSG had purchased any diesel in the name of any other party. There is absolutely no evidence that HSG had itself transported the various quantities of bags as stated in R-Documents.

* The Commissioner in para 30.31 (page 124 of his Order) held that in depth study was conducted in respect of 72 sales bills/invoices. He only gave two examples of truck No. UP-32Z/0307 and UP-32T/5917, which according to him had transported Harsingar Gutkha at Hardoi & Shahajahanpur respectively and the same was re-fuelled there. Even in these two invoices only 40 bags were shown to have been transported which shows that even on TATA 407 which had capacity to carry 70 bags it was not always that 70 bags were transported. There is no other findings by the Commissioner that there was any evidence of purchasing fuel and not recording of the same in the books of accounts of either Anju Agency or Patel Brothers or HSG.

* In fact, there is a huge demand of around Rs. 93.42 crores where the department has not brought any evidence on record that any unaccounted fuel was purchased. There is also no finding by the learned Commissioner in para 30.31 of his Order to this effect. In fact, the finding on vehicle running account are wholly in favour of the HSG that even according to Commissioner only in two cases the department could furnish any evidence of refueling the trucks at Hardoi/Shahjahapur on the dates when 40 bags each were transported on two TATA 407 vehicles. Without prejudice to the fact that there is no evidence that these vehicles were used to transport clandestine removed gutkha as the goods were not admittedly loaded from the factory of HSG but from the premises of the sole selling agents.

* Even assuming for argument sake that Patel Brothers had sold some unaccounted goods, there is only evidence of clearances of 80 bags without payment of duty which will also otherwise falsify/discredit the entire evidence. This fact also will falsify the genuineness of 72 invoices . Even according to Commissioner in-depth study was done only in respect of 27 invoices out of 72 invoices which also dents the credibility or genuineness of all the 72 invoices.

* The statements of drivers that they always transported 70 bags instead of 1,2,3 or 5 bags itself stand falsified and proved to be incorrect as even as per 72 invoices the quantity which was transported on the vehicle in questions ranged from 15 to 150 bags. Hence, any statement which is contrary to the documentary evidence cannot be accepted at all. Perhaps it is due to this reason the Commissioner did not produce the supervisors or drivers for cross examination.

* Even Sh. Om Narain Singh, Prop of Patel Brothers in his statement dated 13-08-01 (Ex-131/page 5251/Vol. 15) had stated that prior to August, 1999 Sh. Jayant Mishra allias Rajan was looking after his establishment till July, 1999 whereas from August, 1999 the computer work of his firm was looked after by Sh. Rajnish Tiwari.

* In his statement dated 18-12-01 Sh. O.N. Singh who was Managing Director of Sanatan Cold Storage Ltd. Had stated that vehicle No. UP32-Z-2178, UP32-Z-2464, UP32-Z-0302 and UP 38-Z-0307 were owned by M/s. Sanatan Cold Storage while vehicle No. UP32-Z-1721 was owned by M/s. Patel Bros and that three vehicles No. UP32-Z-2178, UP32-Z-2464 and UP32-Z-1721 were purchased between September 1999 and December 1999 and were being plied in HSG under the rent agreement.

* In his subsequent statement dated 2-1-2002 (Ex-135-B page 5259/Vol. 15) he stated that three vehicles No. UP-32-Z-1721, UP-32-Z-2178 and UP-32-Z-2464 were given to Anju Agency on rent agreement and two vehicles were delivery vans. In fact, he had categorically stated that he did not have any information that these vehicles were being used for allegedly illegal acts. He was never queried by the investigating officers as to whether upto December, 1999 he had purchased any diesel either in the name of Sh. Govind Singh or any other name thereby disproving the allegations and findings in respect of clandestine clearance by M/s. Patel Brothers.

* He was never confronted with the alleged evidence that when he was owner of Patel Brothers as to whether two consignments were transported without payment of duty as held by the Commissioner in para 30.31/page 124 of Order-in-Original. It is strange that he was queried only about the Anju Agency and HSG and not about his own firm which was sole selling agent of HSG till 31-12-1999.

* Sh. O.N. Singh was never queried about the alleged editing or altering the quantity of bags when his firm was the sole selling agent. He was also not queried as to whether any alteration or editing was done in the CPUs of Patel Brothers and what was the modus operandi allegedly adopted by him.

* It is an admitted position that stock register of Mahesh & Co. and Anju Agency (pl. see volume 6,7 and 8) were retrieved by Steller as such, it is not forthcoming as to why Steller did not retrieve the alleged deleted data of HSG or Patel Brothers or GGI.

* In any view of the matter Shri Mukesh Bajpai in his statement dated 6-7-2001 (Exh. 10 page 789) had clearly stated that HSG had purchased supari from M/s. Mahesh & Co. in the year 2000-01 about 3,06,060 Kg. and in the year 2001-02 (till 13-6-02 ) about 1,20,775 Kg in cash where there was no voucher. Even assuming for argument sake it is presumed that duty of Panmasala/Gutkha can demanded only on the basis of one raw material still the duty demand on the basis of said quantity of supari during the year 2000-2001 would to Rs.3,94,27,700.00 and during the year 2001-02 would come to Rs. 2,21,83,286.00. only. Hence in any case total duty demand can ny no stretch of imagination can exceed Rs.6,16,10,986.00.

(X) SUBMISSIONS ON DEMAND OF RS. 30.31 CRORES (PAGES 141-157 OF THE ORDER) ? In the first place the department has absolutely not given any evidence that HSG had received proportional quantities of various raw materials clandestinely or without accountal such as Supari, Katha, Tobacco, Lime, Menthol, Perfume and Lamination to enable them to manufacture Gutkha/Panmasala and remove the same clandestinely.

? When the department has demanded duty on single raw material i.e. Supari as discussed in para XI and XII of the present written submissions and no further evidence has been given about procurement of other unaccounted raw material question of confirmation of this duty demand could not arise.

? This submission is without prejudice to the fact that even there is no evidence that HSG had procured any quantity of Supari clandestinely.

? Further there is no evidence at all of procurement of other vital raw materials which are essentially required to manufacture finished goods.

? This demand is based on reconstruction of old, deleted, destroyed data from hard disk of HSG and these are allegedly relating to clearances of clandestine clearances. For such alleged clearances, there is no finding at all about receipt of any raw materials.

? In respect of the so-called R-Documents nowhere it has been alleged that the same were retrieved from the CPU of HSG. Even the report of Stellar does not mention anywhere that the same were retrieved from the CPU of HSG. Hence no reliance could be placed on the same.

* On the contrary it has been alleged at internal page 47 running page 513 that the hard disks and the following five firms contained larger number of files which had been deleted or manipulated by way of over writing. The name of these firms are as under:

(i) M/s. Mahesh & Co.

(ii) M/s. Harsingar Gutkha Pvt Ltd.

(iii) M/s. Gopal Grinding Ind.

(iv) M/s. Anju Agencies.

(v) M/s. Sanatan Cold Storage.

* It has been observed that hard copy of deleted files were obtained out of CDs prepared by Steller which contained re-constructed data. Reliance has been placed on certificate dated 2-5-02 (Ex-38 pages 1938 -1941 Vol. 5) certifying the correctness of the data which were re-built from the deleted documents/files of the various hard discs.

* However, the department while demanding duty have treated R documents to be pertaining to HSG when even Steller did not specify in their report dated 2-5-02 that the said re-constructed data was re-built or retrieved from the CPU of HSG. In fact, it has been alleged that the R documents contained sales summary of Patel Brothers for a particular period (Ex. 91/1, 91.2 pages 4120 4125 Vol. 12). In some documents like ST 000625 (Ex-89/1, 89/2 pages 4098-4111 Vol. 12) allegedly show dispatch of gutkha by HSG to Patel Brothers for the period 1-4-1999 to 22-5-1999. Some of these documents allegedly showed dispatches of HSG to Anju Agency for the period 1-12000 to 31-3-2000 (Ex-91/1 and 90/2 pages 4112- 4119 Vol. 12).

* Similarly ST 000546 and 000 613 (91/1 and 92/2) allegedly shows dispatches by Patel Brothers for the period 7-4-1999 to 13-4-1999.

* The department wrongly presumed that these R documents were re-constructed or re-built from the CPU of HSG. In fact, the department in one of their written submissions dated 8-9-2010 has also contended that R documents were retrieved from all five hard discs. In another written submissions dated 02-11-2012 it has been contended that these R documents are retrieved from the CPU of HSG and Patel Brothers without giving any evidence. While recording the statements of Sh. Mukesh Bajpai, Amit Srivastava, Rajnish Tiwari and Mahesh Singh department wrongly attributed R documents to have been re-constructed from the CPU and HSG.

* When even Steller has nowhere stated that these R documents were taken/re-constructed from the CPU and HSG, the department has no right to attribute the same to them and the Commissioner could not confirm the duty demand against them on the said premises. Without prejudice to the various submissions of validity of R documents when there is already duty demand on all the invoices pertaining to Patel Brothers and Anju Agency for the entire period where the quantity was 1,2,3 or 5 bags, confirmation of duty demand on R documents would merely be a duplication and this fact has been accepted by the learned S.G. during his arguments on 18-2-2013.

? In respect of the so-called R-documents the investigating officers had recorded the statements of Shri Mukesh Bajpai, Amit Srivastava, Rajnish Tiwari. The details are already available in point No.IV.

? All denied of having any knowledge of R-documents.

? If any information purportedly stated in R-Documents were actually fed by HSG at least Amit Srivastava would have been aware of the same as he was operating the computer of HSG. There was a possibility that even Shri Rajnish Tiwari or Mukesh Bajpai would have also been aware of the same. Even Shri Mahesh Singh had denied having any knowledge of these documents and clearly stated that these documents did not pertain to his firm i.e. HSG.

? Even assuming these R-Documents were retrieved or re-constructed from the CPU belonging to HSG, the same was lying with the department unsealed for a number of months. Hence possibility of any manipulation could not be ruled out.

? There is absolutely no supporting evidence or material which can indicate that the so-called R-Documents related to any clandestine clearances from HSG.

? Nothing to show that old and destroyed hard disk data allegedly re-constructed were correct and not the statutory records of HSG such as RG-I Register and RT-12 returns.

? The buyers/14 dealers have categorically stated in their statements that they were buying the goods from Anju Agencies. No dealer has ever stated that they were buying the goods directly from HSG, hence there could not a any possibility of stale of Gutkha directly by HSG.

? In the purported R-Documents nowhere it has been mentioned that the same pertain to clearances of Gutkha without payment of Central Excise duty that too by HSG. In majority of the said documents under the Column Dispatch some words are written in abbreviated form such as SBD, SANDILA, HRI, SPN, JAIN, STP, GOLA, PUWAYAN, MANOLI etc. Nowhere it has been stated either in the show cause notice or Order-in-Original as to for what these abbreviated words stood for. No effort made to find out whether the same were the names of the parties or names of the places or stand for anything else.

? In any event it was obligatory upon the investigating officers to have conducted proper enquiries in this regard and should have brought evidence on record that the said dispatches pertained to the clandestine clearances of Gutkha/Pan Masala by HSG.

? There is absolutely no evidence on record to show that HSG had received any raw material clandestinely to manufacture the quantities shown in R-Documents and also no evidence to show unaccounted payments to the suppliers of the raw materials.

? There is absolutely no evidence that the goods mentioned in R-Documents were ever supplied to any dealer directly by HSG or through M/s. Patel Brothers or Anju Agencies. .

? Dealers of Anju Agencies/Patel Brothers have been made parties in respect of 72 invoices only. If there would have been any truth about the clearances on the basis of R-documents, the dealers would have also been made parties in respect of purported clearances shown in the R-Documents.

? The department nowhere proved any nexus between the figures given in R-documents and actual clearances allegedly effected by HSG.

? No reliance can be placed on R-Documents as the CPU of HSG was not sealed on 4-7-2001.

? There is no mention in the said search panchnama about the seized computer of HSG having been sealed at the time of its seizure on 4-7-2001. Also there is no statement recorded after the date of seizure from S/Shri Mukesh Bajpai, Amit Srivastava, J.K. Dixit or Kanshi Parshad to the effect that the said computer had been sealed at the time of its seizure on 4-7-2001.

? In connection with the aforesaid, so-called R-documents, that the HSG always sold the goods to its sole selling agents, namely, M/s. Patel Brothers upto 31-12-1999 and M/s. Anju Agencies thereafter. The HSG never had the system of selling the goods directly to the dealers. No buyer has said that any goods were purchased by them directly from HSG. No invoice was found at the HSG premises or at any other premises showing any sale of the goods by the HSG to any dealer. Obviously, the R-documents could never have led to any presumption as if the quantities mentioned therein were clandestinely dispatched from HSGs factory to the dealers or any other person.

? That in the same very R-documents, bank and cash balance was also mentioned. If at all the said R-Documents are to be relied upon as alleged by the department, in that event there is absolutely nothing to show that how the sale proceeds of such huge sales running into hundreds of crores of rupees were received or accounted for. Admittedly no irregularity has been found in the HSGs Bank accounts. Admittedly, no cash was found at HSGs premises. Even in the said so-called R-documents, there is no mention of any cash proceeds of any such clandestine clearance having been received by HSG.

? The theory propounded by the department in the show cause notice and by the Commissioner in the order-in-original that there was a co-relation of retrieved documents between themselves is not true. It appears that some one has got these prepared and obliviously that these have been prepared in way that they will correlate with each other to some extent. In this regard attention is invited to the statement of Shri Mahesh Singh which was recorded on 11-10-2001 (Vol-2 P-536). In this statement Shri Mahesh Singh was shown R-documents and questions were put on the same. These R-documents were purportedly retrieved by Stellar after the hard disks were taken by them on 23-1-2002 and forwarded the same to the department on 2-5-2002. Hence the so called R-documents were not even in existence on 11-10-2001. Hence, Shri Mahesh Singh could not be quarried on the said date about these documents. It shows that obviously there is something fishy in the entire investigations. Nothing can turn if retrieved documents are tallying with some entries of RG-1 register etc. One cannot compare few entries and then say that the remaining entries even if they were not tallying there must be presumption about clandestine manufacture and clandestine clearance.

? Assumption was made to co-relate the figures shown in re-constructed R-Documents with 32 loose sheets Exhibit 39/1 to 39/32 pages 1942-1950 Vol 5 & 1951 to 1973 Vol. 6 showing daily production allegedly seized from the premises of HSG. Submissions on these 32 loose sheets are being made separately.

? Once fabricated nature of R-documents are established, there is no merit to compare the figures with 32 loose sheets. Even 32 loose sheets were fabricated by the department as admitted by Shri Vishnu Narain Panday and Shri Vinod Kumar Verma, employees of HSG in their cross examination on 8-9-2004 (pages 34-35/Vol.I).

? It appears that some one has got these documents prepared in a way that they will co-relate with each other to some extent. Merely because some of the entries in 32 loose sheets and R-documents were matching that does not give rise to the presumption about clandestine manufacture and clearance on the part of HSG.

? Even otherwise no reliance can be placed on re-constructed documents. The R-documents are placed at pages 3278 to 4176 Vol. 9 to Vol. 11. These pages are appeared to be prepared by Stellar and do not seem to be original pages as on each page either it has been mentioned that the same are either reconstructed documents or edited documents. This will be clear from the numbers assigned to each page giving clear indication that these are edited pages.

? The Stellar in its report has also stated that they have re-constructed the various files lying scattered but nowhere stated that the same were retrieved as such/in original form from the CPU of HSG. In any event, there are bound to be fatal inaccuracies when the pages containing figures that too lying scattered are re-constructed. This has been made clear by Shri Pankaj Mathur in his affidavit dated 5th March, 2005 (pages 196 to 198 Vol 1.) There are numerous pages in these re-constructed files which are mojibake. ( pages 4103, 4109, 1402, 4130 Vol. 11)Stellar has also stated in their report that the files were not in their original form.

? The Stellar has used terms data retrieved and re-constructed interchangeably without explaining the correct purport of these two different terms.

? To a lay man retrieval means to take out in its original form whereas reconstruction means re-building. Hence no reliance can be placed on the Stellar report and the documents retrieved or re-constructed by them.

? There are numerous purported files which were reconstructed.

? even in the show cause notice at page 47 onwards / 513-Vol 2 it has been alleged that R-Documents were part of reconstructed files.

? Stellar has only reconstructed the data (Page-1941/5) when the same should have been retrieved as such.

? As per the report of Stellar deleted documents would have retrieved in its original form and not in reconstructed form.

? There is absolutely no corroboration of the figures mentioned in R-Documents were the actual clearances effected by HSG.

? Files such Exh. 89/1, 89/2, page 521/Vol 2, files 92/1, 92/2 page 529/Vol.2 are clearly mentioned as edited files.

? Majority of the R-Documents are reconstructed documents hence cannot be relied upon.

* It is the department own case that all the consignments were transported on the following eight vehicles:

(i) UP 32 T/5917 (Tata 407)

(ii) UP 32 T/9879 (Mini truck)

(iii) UP 32 Z/2178 (Tata 407)

(iv) UP 32 T/7220 (Mini Truck)

(v) UP 78 N/0664 (Tata 407)

(vi) UP 32 Z/7044 (Tata 407)

(vii) UP 32 Z/1721 (Delivery Van)

(viii) UP 32 Z/2464 (Delivery Van) * No evidence at all provided that the varius quantities mentioned in the bags were transported on above stated 8 vehicels.

* Even the drivers or supervisors or any other person were not confronted with the R-documents to know from them as to whether they had loaded allegedly the quantities mentioned in the said R-Documents were transported by them. Even the drivers or the Supervisors were never confronted with the said R-Documents. They would have been the best persons tell as to whether they had transported the said quantities in the vehicles being driven by them.

* . Similarly in respect of the alleged clearances on the basis of R documents there is absolutely no evidence at all the HSG had purchased any diesel in the name of any other party. There is absolutely no evidence that HSG had itself transported the various quantities of bags as stated in R-Documents.

* In event of the matter none of the 16 dealers were ever confronted with these R-Documents and never asked whether they had received the said quantity without bills from HSG.

? Even otherwise the department has accepted in their written submissions in point No. (f) at page 57 that the records retrieved by Stellar were not in the same format as they were entered in the CPUs. This argument of the department clearly creates several doubts on the authenticity of the R-documents. It is strange that the department is distorting the facts as for as the statements of the employees of HSG, Anju Agencies and Shri Mahesh Singh are concerned. It is an admitted position that Shri Mahesh Singh had stated in his statement that these documents did not pertain to them. Similarly, employees of HSG and Anju Agencies also denied having any knowledge about such documents. The department is distorting their statements that they had not stated that information did not pertain to the company or these were fabricated or these records were retrieved from their companys CPUs. It is to be appreciated that the statements of Shri Mahesh Singh and the employees were recorded in question and answer form. When they had disowned these documents it was for the Revenue to have put them the quarries if they still believed that these documents pertained to HSG. Further the so called R-documents were not retrieved in the presence of representative of HSG.

? Even assuming for arguments sake that the R-documents shown to Sh. Mahesh Singh and other employees were not in same format as contended by the department at point No. (f) page 57 of these written submissions, these aspects should have been got clarified while recording various statements.

? The evidence on record would clearly show that R-Documents were fabricated/planted documents hence Commissioner could not have confirmed duty demand on the said R-Documents.

* In any event Shri Mukesh Bajpai in his statement dated 6-7-2001 (Exh. 10 page 789) had clearly stated that HSG had purchased supari from M/s. Mahesh & Co. in the year 2000-01 about 3,06,060 Kg. and in the year 2001-02 (till 13-6-02 ) about 1,20,775 Kg in cash where there was no voucher. Even assuming for argument sake it is presumed that duty of Panmasala/Gutkha can demanded only on the basis of one raw material still the duty demand on the basis of said quantity of supari during the year 2000-2001 would to Rs.3,94,27,700.00 and during the year 2001-02 would come to Rs. 2,21,83,286.00. only. Hence in any case total duty demand can ny no stretch of imagination can exceed Rs.6,16,10,986.00.

(XI) SUBMISSIONS ON DUTY DEMAND OF RS. 22,43,58,638/- (PARA 45 AT PAGES 203- 213):

? Findings on this issue are based on the records of M/s. Mahesh & Company allegedly reconstructed from deleted or destroyed data of their computer. The HSG purchases uncut supari from M/s. Mahesh & Company.

? The quality of such supari has been arrived from the stock registers of M/s. Mahesh & Company-enclosed as Exh 65A to 65D pages 2411 to 2876 Vol. 7 & 8.

? As per the said records, M/s. Mahesh & Company was also making cash sales of uncut supari. In the invoices relating to cash sales the customers addresses were not mentioned. The Commissioner has held that all supari covered by such cash sales of M/s. Mahesh & Company must have been sent to the HSG. In this connection, the reasons given by the Commissioner are broadly as under:

? Supari sold in cash by M/s. Mahesh & Company was of red variety. From this it has been presumed that it was meant for the HSG.

? Since almost the entire quantity of supari purchased by M/s. Mahesh & Company were of red varieties used exclusively in manufacturer of pan masals, the cash transactions of sales to various parties as recorded in their cash register were not genuine.

? Such cash sales of supari by M/s. Mahesh & Company were of more than Rs. 50,000/- and thus in violation of law.

? Supari purchased by M/s. Mahesh & Company under the same bill was partly sold to the HSG and partly in cash to various buyers.

? M/s. Mahesh & Company did not explain the particulars regarding cash transactions with different buyers and it failed to produce the buyers before the Department and thus cash transactions of M/s. Mahesh & Company are suspect.

? Even though there was no evidence of the HSGs receiving any such supari covered by cash bills of M/s. Mahesh & Company, the HSG would hardly preserve any such documentary evidence and the same would have been destroyed after receiving the consignments.

? It is submitted that the aforesaid reasons given by the Commissioner are mere surmises and conjectures. HSG was not in any way concerned with whether M/s. Mahesh & Company made cash sales or credit sales and as to who were its buyers in respect of cash sales. No presumption of any nature could be drawn that simply because supari was of red variety, all cash sales of supari by M/s. Mahesh & Company must have been diverted to HSG. There was no evidence at all to the following effect:

? Nothing to show transportation of such supari to HSGs factory.

? Nothing to show receipt or use of such supari at HSGs factory.

? Nothing to show payment by HSG to M/s. Mahesh & Company.

? It is further submitted that in connection with the said cash sales of M/s. Mahesh & Company, no documents or records were seized from HSG or from its factory or offices and no presumption of any nature can be made against the HSG.

? In connection with the said issue the Commissioner has also relied on the statements of Mukesh Bajpai, Mahesh Singh, Anjani Kumar and Ashish Kumar Mishra.

* There are material contradiction in the statement of Mukesh Bajpai who one of his statements dated 6-7-2001 (Exh. 10 page 789) had clearly stated that HSG had purchased supari from M/s. Mahesh & Co. in the year 2000-01 about 3,06,060 Kg. and in the year 2001-02 (till 13-6-02 ) about 1,20,775 Kg in cash where there was no voucher. Even assuming for argument sake it is presumed that duty of Panmasala/Gutkha can demanded only on the basis of one raw material still the duty demand on the basis of said quantity of supari during the year 2000-2001 would to Rs.3,94,27,700.00 and during the year 2001-02 would come to Rs. 2,21,83,286.00. only. Hence in any case total duty demand can ny no stretch of imagination can exceed Rs.6,16,10,986.00.

* Hence, even assuming there was diverstion of Supari from the premises of M/s. Mahesh & Co. to HSG and assuming that statements of Shri Mukesh Bajpai was admissible in law still the Commissioner could not confirm duty demand beyond Rs.6,16,10,986.00 * It is to be appreciated that it is the department which is relying upon the statements of Shri Mukesh Bajpai.

? Mahesh Bajpai died on 07.01.2003 and could not be cross-examined. Anjani Kumar was a computer operator of M/s. Mahesh & Company and he stated that sale bills relating to cash sales were prepared by him and that he neither met the customers nor he received any cash receipts. He has nowhere said that the supari covered by cash sales were diverted to HSG. Mahesh Singh had stated in his statement that the said cash sales were made to various buyers in cash or who deposited advances and that in respect of such cash transactions the buyers names were available in the records but their addresses were not recorded. When Mahesh Singh was shown the statements of other persons, he stated that he does not agree but is not in a position to give full clarification immediately. However, his original statement was distorted (page 898 of Volume 3) and this fact was also stated in retraction of Mahesh Singh (pages 166-167 of Volume I).

? In none of the statements Shri Mahesh Singh was even quarried about the alleged diversion of supari sold by Mahesh & Co. on cash basis to HSG. There were also no suggestion to him to this effect.

? No adverse conclusion can be drawn against HSG on the basis of transactions of a third party i.e. Mahesh & Co.

? M/s. Mahesh & Co. was preparing their books of accounts and filing their annual returns such as Balance sheets in which the said cash transactions have been accepted to be between the various buyers and Mahesh & Co. These transactions have been accepted to be trading transaction between Mahesh & Co. and various parties by the Income-Tax department and the other statutory authorities. Hence no adverse presumptions can be drawn that the said quantity was diverted to HSG.

? Ashish Kumar Mishra was an employee of Gopal Grinding Industries and he had only stated that whatever materials were grinded by Gopal Grinding Industries, these were sent to HSG. He did not say that supari covered by cash sale bills of M/s. Mahesh & Company was diverted to HSG or even to Gopal Grinding Industries.

? It is very clear from the cross-examination of both Shri Ashish Kumar Misra and Anjni Kumar pages 31-33 Vol. 1. that supari was duly sold by Mahesh & Co. to various buyers on cash basis.

? While drawing a presumption that the supari sold by Mahesh & Co. was diverted to HSG, there is no categorical allegation leveled or evidence was given in the show cause notice.

? It, is only prima facie view of the department that such supari was diverted to HSG Internal page 99 of SCN Page 565/2 meaning thereby there is no conclusive evidence to arrive at such finding.

? Again at internal page 97 of SCN running page 563- Vol.2 it has been alleged that supari of these categories must have been sold by Mahesh & Co. to HSG and no one else to manufacture panmasala only.

? In any event of the matter even if it is presumed that the entire quantity of supari i.e. 14,08,621.90 Kg was allegedly diverted by Mahesh & Co. to HSG still the duty demand would stand reduced to Rs. 19,50,22,305 instead of Rs. 22,43,58,638/- as the Department did not consider wastage of 10% which invariably arises durig the process of grinding.

(XII) SUBMISSIONS ON DUTY DEMAND OF RS.18,18,84,268 PARA 33 PAGES 166 TO 178 ? Out of this, demand of Rs. 15,02,56,531/- is based on the challans of Gopal Grinding Industries allegedly reconstructed from deleted/destroyed data of hard disk of its CPU and by taking mirror image of the hard disk. On the admissibility of any such evidence and other connected aspects on this issue, detailed submissions have been made subsequently in separate paragraph.

? Gopal Grinding Industries was merely a job worker who was cutting supari and sending the same to HSG.

? Nothing to show from whom any alleged quantities were purchased and who paid for it and how it was paid.

? No details of any payments made to suppliers of supari.

? Nothing seized from HSG.

? Not HSGs documents.

? Nothing to show any delivery of cut supari to HSG other than recorded in books of accounts.

? Nothing to show payments by HSG to GGI ? Nothing to show clandestine manufacturer or clearance of final products out of any such quantity.

? The Central Excise Authorities had thoroughly searched factory premises of HSG as well its office premises. Not a single challan of any such cut supari relatable to the said alleged computer retrieved challans was recovered. The Commissioner has held that It is self-evident that being documents reflecting unaccounted receipt of such material, that would not have been preserved by M/s. HSG. He has further held that non-recovery of any such corroborative evidence at the premises of HSG was irrelevant due to their being destroyed by the party or their concealment in the places. There is absolutely no material whatsoever to support any such perverse finding.

? There is a further demand of Rs. 17,92,653/- by alleging multiple use of Challan No. 6 dated 17.05.2001. In this connection neither there was any evidence of receipt of materials under any such alleged multiple challans nor any such challan was found or seized from HSGs factory or office premises nor there was any acknowledgement of the HSG on any such challan. The Commissioner has however confirmed the demand (para 33.13 to 33.15 at pages 171-172).

? There is a further demand of Rs. 89,83,641/- based on a statement prepared by Trade Tax Department about cash memos of Gopal Grinding Industries. There was no evidence about receipt of any such goods at factory of HSG or payment for any such goods by HSG. Even the Challans were not on the record nor these were with the Central Excise Department nor were these seized from anywhere. Simply because of a statement about different cash memos of Gopal Grinding Industries, no presumption of any nature can be drawn as if the goods covered by such cash memos must have been received by the HSG clandestinely and must have been utilized in manufacturer of its final products which must have been cleared without payment of such huge amount of duty of Rs. 89,83,641/-. The HSGs submissions in this regard have been rejected by the Commissioner on the ground that evidence regarding receipt of unaccounted materials would have been destroyed by the party.

? Demand of duty of Rs. 14,28,570/- has been made due to difference in the closing and opening balances in the stock register of Gopal Grinding Industries. This was rectified when the mistake was detected. The Commissioner has held that there was no remark explaining the reason and that why the rectification was made in the year 2000 and not in the year 1999 and that no independent evidence or document was produced by HSG.

? Demand of duty of Rs. 1,41,31,053/- has been made on the quantity alleged found short during stock taking at Gopal Grinding Industries. It was submitted that only partial stock-taking was conducted and that the stock lying at other godown was not taken into account. This has however been disbelieved by the Commissioner.

? There are two other findings about supari involving duty of Rs. 1.54 lakhs and Rs. 6.29 lakhs at pages 185-186.

? It is well settled law that no conclusive presumption can be drawn about the manufacture of finished goods merely on the basis of one raw material which constitutes 70% of the finished goods. The revenue has to prove beyond doubt about the use of all the materials in order to establish proof of manufacture of finished goods.

? It is submitted that the aforesaid findings of the Commissioner with regard to the said demand of Rs. 18.10 crores based on the allegedly retrieved records of Gopal Grinding Industries are perverse and baseless. In any event and without making any admission of any nature and in the alternative it is submitted that if at all the cash sales of Mahesh & Company involving duty of Rs. 22.43 crores are taken to be diverted to HSG, this demand of Rs. 18.10 crores will be a mere duplication of demand based on the same supari after cutting. Admittedly, at the factory of HSG there is no cutting machine and all cutting was being done by Gopal Grinding Industries.

? Without prejudice to the aforesaid and without making any admission it is submitted that even if the Departments case as made out by the Commissioner is taken as it is, the duty quantified by the Commissioner based on alleged receipt of Supari clandestinely comes as under:

Rs. 2.11 crores Balance Sheet and Form IV page 198 Rs. 53.51 lakhs Clerical mistakes pages 199-202 Rs. 28.03 lakhs Mistake rectified pages 202-203 Rs.22.43 crores Cash sales of Mahesh & Co pages 203-213 Rs.18.10 crores Grinding of Supari by Gopal Grinding Company pages 166-178 ? It is further submitted that for total demand of duty of Rs. 137 crores, supari required will be 1.07 crore kgs. As against this, findings about supari are only for duty of Rs. 25.36 crores and each of the said findings is totally perverse and untenable. Without supari, it is simply impossible to manufacture gutkha and pan masala. There is absolutely no evidence about receipt of such a huge quantity of manufactured supari and fact of its being cut in the premises of Gopal Grinders.

? No reliance can be placed on reconstructed deleted challans purportedly of Gopal Grinding Industries as the said challans were not retrieved but reconstructed para 21 of SCN 537/Vol.-2 and further details of the same at pages 538 onwards Vo. 1.

? There is also no evidence that grinded supari was supplied to HSG on the strength of multiple challans.

? It is also on record that Gopal Grinding Industries was also grinding Katha; Katha is used to the extent of 14% in the manufacture of Gutkha. There is absolutely no trace of Katha being grinded proportionately by Gopal Grinding Industry..

? If there was unaccounted supari grinded by M/S. Gopal Grinding Industries and sent to HSG on the strength of multiple number of challans of same number there was bound to be grinding of unaccounted Katha also by the said M/S. Gopal Grinding Industries.

? There is neither any allegation nor any evidence that M/S. Gopal Grinding Industries grinded any Katha or cardamom without accountal.

? If there was any truth in the multiple challans of supari available in the CPU of M/S. Gopal Grinding Industries there were bound to be unaccounted challans of Katha available in the same CPU.

? Non-availability of any unaccounted challans relating to Katha in the CPU of M/S. Gopal Grinding Industries fully establishes that there was no supply of unaccounted supari to HSG by M/S. Gopal Grinding Industries on the alleged multiple challans of same number.

? In regard to handing over of multiple challans No. 6 dated 17-05-2001 by Trade Tax Department to Central Excise Department, no explanation is forthcoming as to why Trade Tax department would keep photocopies of any challans of supari. It is not the job of Trade Tax department to keep photocopies of the documents, though they may be competent to verify the genuineness of such challans.

? In view of the above, the Commissioner could not have confirmed the duty demand on 7 challans bearing no.6 all dated 17-5-2001-pages 1507 -1513/Vol.4 allegedly provided by the Trade Tax department. A perusal of the said 7 copies of the challans would show that they are unsigned copies whereas the actual challan No.6 which was seized from the factory of the Gopal Grinding Industries was a signed copy. Please see page 151 Vo.4 where actual challan No.6 bears the signatures of the authorized signatory of Gopal Grinding Industries, therefore, seriously denting the genuineness of these multiple challan of same number.

? In case Gopal Grinding Industries would have actually grinded the quantity of supari on the basis of the said challans the copies of the same would have been found either in the premises of Gopal Grinding Industries or HSG. The same would have also been retrieved from the CPUs of Gopal Grinding Industries and HSG.

? The genuine challan No.6 dated 17-5-2001 which bore the signatures of the authorized signatory of M/S. GGI was duly recorded in the Books of Accounts of both Gopal Grinding Industries and HSG.

? No efforts were made to find out as to whether the Gopal Grinding Industries had actually grinded such a large quantity of supari on 17-5-2001 or they had capacity to grind such a large quantity of supari in a single day. Hence duty demand on 7 multiple challans bearing No. 6 all dated 17-5-2001 cannot be confirmed merely on the basis of said challans. The department has not given any basis to demand duty on the finished goods that too against HSG on the basis of challans of one raw material.

? As regards duty demand on the basis of Exhibit 56 pages 2296 to 2333/Vol. 6 & 7 no reliance could be placed on such rebuilt challans as they do not bear signatures of any person. In other words these are unsigned copies. There is no statement to prove that Gopal Grinding Industries had actually grinded raw materials such as supari, kattha and cardamom on the basis of these rebuilt challans.

? No evidence whatsoever has been given as to from which source HSG had procured the said quantity of unaccounted supari hence nothing turns on the said challans. In fact in the show cause notice no duty demand has been proposed in respect of challans which have been enclosed as Exhibit 56 to the show cause notice.

? In respect of duty demand vide Exhibit 57 the allegations to that effect are at pages 552 of the show cause notice wherein a duty of Rs.1,34,75,461/- has been demanded on the ground that as per the statement prepared by Trade Tax department cash memos bearing no.1 dated 1-4-2000 to 1219 dated 9-12-2000 were resumed by Trade Tax department.

? The copies of the said statement prepared by Trade Tax department stands enclosed at pages 2334 to 2350/Vol.-7. A perusal of the said so called statement would clearly show that the same by no stretch of imagination can be treated as statement by the Trade Tax department. The same appears to be some reconstructed data the source of which has not been specified anywhere. The so called cash memos have not been relied upon anywhere in the show cause notice.

? In the first place the said sheets cannot be treated to be a statement by Trade Tax department as except for their stamp there is nothing on record to show that the statement was prepared by Trade Tax department.

? No so called resumption memo reference of which has been given at page 552/Vol. 2 of the show cause notice has been relied upon or a copy provided of the same to HSG.

? No date of so called resumption memo has been given anywhere.

? Even otherwise a perusal of Exhibit 57 does not disclose that the same is based on some cash memos.

? No evidence has been brought on record that from which source unaccounted supari, kattha etc were procured by HSG and supplied to Gopal Grinding Industries for grinding purpose.

? A perusal of sheets at Exhibit 57 does not inspire any confidence as it neither mentions the name of Gopal Grinding Industries nor in any manner indicates that it relates grinding of supari, kattha or cardamom.

? The duty demand vide Exhibit 57 is purely based on unwarranted presumptions. Further, in the show cause notice it has been alleged that from this quantity of 55024. 8 Kg. HSG could have manufactured 78606.857 Kg of Gutkha of 1.75 grms. The duty demand cannot be confirmed on such unwarranted assumptions and inferences.

? The department has not brought on record any evidence that HSG had paid any grinding charges with respect to the supari, kattha or cardamom to Gopal Grinding Industries with respect to the duty demand under this heading.

? The department did not take any pains to find out as to whether Gopal Grinding Industries grinded the proportionate quantities of supar, katha and cardamom during the disputed period in order to corroborate their case when they had all the so called evidence under their command on which they had placed reliance while demanding the duty.

? It is very strange that while demanding duty on the basis of Exhibit 57 the department demanded duty on the basis of certain quantity of supari. When the said chart also showed the quantity of katha and cardamom in such a case it was the bounded duty of the investigating officers to find out whether Gopal Grinding Industries had also received proportionate quantity of kattha and cardamom as these raw materials are also essentially required to manufacture the finished goods, i.e. Pan Masala and gutkha.

? The majority of duty demand on Rs.15.02 crores is on the basis of reconstructed deleted channels of Gopal Grinding Industries allegedly used for delivery of grinded material to HSG.

? In this regard the department prepared Exhibit No.93 (I) to Exhibit No. 93(IV) and allegations to this effect are found in para-21 at pages 537 to 551 of the show cause notice/Vol.-2. This duty demand has been confirmed on the basis that 700 gms of supari is used in the manufacture of 1 Kg. Gutkha..

? According to the department these are the multiple challans bearing same number repeatedly on different dates or on the same dates.

? A perusal of Exhibit No.93(I) to Exhibit No.93 (IV) - pages 4145 -4176/Vol-12 would show that the number of these challans have been given only on the basis report of Stellar Information Systems Ltd without actually relying on the challans themselves. It is the departments own case as can be made out by perusing allegations leveled in para-21 of the show cause notice page 537/Vol.12 onwards. That the deleted data was got reconstructed with the assistance of Stellar Information Systems Ltd. from hard disc of the computer of Gopal Grinding Industries. As per report of Stellar Information Systems Ltd. where the data was deleted the same could be retrieved. If Gopal Grinding Industries had actually deleted the challans the same would have invariably been retrieved by Stellar Information Systems Ltd. In that case Steller should have forwarded the copies of the retrieved challans under which cut supari was allegedly supplied by GGI to HSG.

? On contrary the allegation is that the deleted data was got reconstructed which is not in tune with the report of Stellar Information Systems Ltd.

? It has already been contended time and again that no reliance can be placed on reconstructed data if the department was of the view that Gopal Grinding Industries had deleted the challans from their CPUs. In such a case it was highly obligatory on the part of the department to have retrieved copies of the purported deleted invoices. It has already been contended in the preceding submissions while dealing with the issue of reconstructed data that such reconstructed data has no evidentiary value. The same submissions are reiterated even for the demand on the basis of reconstructed data of Gopal Grinding Industries.

? Further, the purported deleted challans mentioned the truck numbers in which said consignments were purported to be transported. There is not even a single statement from any truck driver to verify as to whether they had transported any of such consignments on a particular date.

? If even as per the Stellar Information Systems Ltd. report only the super imposed data could not be retrieved in original but it is not their case that deleted data could not be retrieved. In such a case the Stellar Information Systems Ltd. should have retrieved the deleted challans and question of any reconstruction of data would not have arisen.

? Therefore, no reliance can be placed on purported reconstructed data relied upon vide Exhibit No. 93(I) to Exhibit No. 93 (IV) without the copies of the challans.

? No proper investigation was conducted regarding the reconstructed challans purportedly retrieved from the CPU of GGI.

? In the first place it has already been contended that no copies of reconstructed challans was retrieved by Stellar but only a list of the same.

? The list of reconstructed challans was only shown to Shri Mahesh Singh who vide his statement dated 6-5-2002 and 7-5-2002 (Exh. 19M & 19N pages 995 & 999 Vol.-3) maintained that the challans of same number could be due to clerical errors and computer malfunctioning.

? Nowhere in these statements Shri Mahesh Singh accepted that the grinded Supari was sent multiple times by GGI on challans of same number.

? In any event Shri Mahesh Singh was not confronted with copies of the so called deleted challans.

? It is very strange that Shri Ajay Pandey who was preparing challans for GGI was only confronted with seven challans allegedly resumed by Trade Tax Department, bearing same No.6 but not confronted with any other evidence retrieved by Stellar from the CPU of GGI.

? In fact it was Shri Ajay Pandey who could have clarified whether GGI had generated challans of same number multiple times.

? Even no statement from HSG recorded on any or any of the evidence attributed to Gopal Grinding Industries.

? No corresponding challans were seized from the factory of HSG. There is no evidence that the said quantity of Supari was sent by HSG to GGI.

(XIII) DUTY OF RS. 2,11,56,742/- (PARA 44.1 TO 44.3 AT PAGES 198-199):

? The Department worked out the difference in receipt of supari as recorded in the balance sheets, purchase invoices and stock register and compared the same with the quantity recorded in Form-IV Register. The differential quantity was held to be used for manufacturer of pan masala/ gutkha involving duty of Rs. 2.11 crores.

? HSGs submission was that the quantities recorded in the balance sheets and stock register were of uncut supari purchased by it. This supari was cut by M/s. Gopal Grinding Industries and after such cutting whatever quantity was received; it was recorded in the Form IV Register. It was further submitted that in the process of cutting, there was also a huge wastage and due to the difference between the said two records, it can never be held that any quantity of supari was clandestinely received by the HSG.

? The Commissioner rejected the said submissions on the following grounds:

; In Form IV Register the title under which entries were made was supari, there was no mention of cut or uncut supari.

; Under Rule 55, raw material account has to be maintained in respect of raw material received by the assessee which in this case was uncut supari.

; Thus it can be concluded that supari recorded in Form IV Register was nothing but supari purchased by the HSG.

? It is submitted that the said findings are totally perverse. Firstly, the relevant period under dispute is 1998-99 to 2001-02 whereas Rule 55 of the Central Excise Rules, 1944 was omitted from the Rules vide Notification No. 15/98-CE (NT) dated 02.06.1998. Thus Rule 55 was not even in the statute book for most of the period. Even otherwise, as would be evident from Form IV Register itself, against entries of receipt of supari recorded in the said Register, name of Gopal Grinding Industries as well as the connected Invoice Number and date were clearly mentioned. Thus it was obvious that what was recorded in Form IV Register was the quantity received from Gopal Grinding Industries (pages 1285 to 1297 of Volume IV).

? The Commissioner failed to appreciate that quantity of uncut supari received by an assessee and quantity of cut supari obtained from the same can never be equal and there is bound to be huge wastage in the process of cutting. In the present case as per para 44.1 (Page 198), total uncut supari received was 7,45,857 Kgs and difference in the quantity recorded in Form IV Register was 1,48,097 Kgs which was well below the standard/average wastage which is generated during the process of cutting. .

(XIV) DUTY OF RS.53,51,429 (PARA 44.4 TO 44.16 AT PAGES 199-202):

? HSG received 8960 kgs of supari under Invoice No.1184 dated 19.02.1999 and it was entered in Stock Register on 20.08.1999. This quantity was issued to Gopal Grinding Industries under Challan No. 36 dated 23.08.1999. In Stock Register this Challan No. 36 dated 23.08.1999 was correctly entered. However in grinding register, date of this Challan No.36 was mentioned as 08.08.1999 and this was a clerical mistake. There was absolutely nothing to show that two consignments of the said quantity were received or issued for cutting. It is also not the Departments case that 2 challans No.36 of different dates i.e., 08.08.1999 and 23.08.1999 were found or issued. The Commissioner has however confirmed the demand by holding that apart from mentioning it as a clerical mistake no other evidence has been produced to show that these were actually clerical mistakes ? In respect of another quantity of 4500 kgs there was a clerical mistake in mentioning invoice No.74051 instead of 24051. This was a clerical mistake but the Commissioner has held that the HSG should have made necessary rectification and that in the absence of any evidence of clerical mistake, this quantity must be taken to have not been recorded in the records. (para 44.12).

? There was also a subtraction mistake due to clerical error in respect of the quantity of 24,000 kgs which was rectified in the records. The Commissioner has however held that why a mistake should be rectified after a gap of time and why proper remarks were not given for the discrepancy and due to this reason the said quantity must be held to be clandestinely received and then used for manufacturer of goods clandestinely cleared (para 44.13 to 44.15).

? It is submitted that each of the aforesaid findings of the Commissioner relating to the said demand of duty of Rs.53,51,429/- are totally perverse and are based upon mere surmises and conjectures.

(XV) DUTY OF RS. 28,03,168/- (PARA 44.17 TO 44.19 AT PAGES 202-203):

Based on the stock register it was alleged that a quantity of 11,446.270 kgs was less carried forward in the opening balance of 01.04.2001. It was submitted that this stock lying with Gopal Grinding Industries was wrongly included in the computer and the mistake was rectified. The Commissioner has held that he is not quite convinced with the explanation and that while rectifying the mistake no remark or indication was given explaining the discrepancy.

(XVI) THE CONTRADICTORY NATURE OF THE EVIDENCE IN RESPECT OF DUTY DEMAND OF RS.22.43 CRORES AND RS. 18.18 CRORES WHICH IS FATAL TO THE CASE MADE BY THE DEPARTMENT.

? The duty demand of Rs.22.43 crores (Appx.) is on the ground that cash sales of supari by M/s. Mahesh & Co. must have been sold to HSG as M/s. Mahesh & Co. did not explain the particulars of the said buyers.

? The demand of Rs.18.19 crores is on the ground of re-constructed challans retrieved from the computer of Gopal Grinding Industries (M/S. Gopal Grinding Industries) and duplicate challans of one number and statement prepared by Trade Tax Department etc. In other words, the said demand is on the basis of some retrieved records of M/S. Gopal Grinding Industries as explained in the present written submissions.

? It is an admitted position that M/S. Gopal Grinding Industries was set up for grinding of supari, katha and cardamom purchased by HSG from their suppliers.

? The same used to be transported to the premises of M/S. Gopal Grinding Industries.

? In turn of M/S. Gopal Grinding Industries used to grind supari, katha and cardamom and send it back to HSG on the strength of challans.

? It has come on record that M/S. Gopal Grinding Industries was doing the grinding work of only HSG.

? There is absolutely no allegation or findings that the allegedly diverted supari by Mahesh & Co. to HSG was ever grinded in the premises of M/S. Gopal Grinding Industries. It must be appreciated that the so called diverted supari from Mahesh & Co. could not have been used unless the same was grinded in the premises of M/S. Gopal Grinding Industries as grinding is an absolutely essential process in the manufacturing of panmasala/gutkha.

? There is absolutely no evidence on record that the said quantity was sent for grinding to M/S. Gopal Grinding Industries. In these circumstances, question of its use in the manufacture of panmsala/gutkha by HSG would not arise at all.

? It can therefore be concluded that such quantity on the basis of which duty to the tune of Rs.22.43 crores has been confirmed was never grinded in M/S. Gopal Grinding Industries and was never used in the manufacture of finished goods by HSG.

? As regards the demand of Rs.18.18 crores which has been confirmed on the ground of alleged retrieval of data from M/S. Gopal Grinding Industries, there is absolutely no evidence on record that the said quantity of supari was ever received by M/S. Gopal Grinding Industries from any source.

? After all the question of grinding of supari would arise only if HSG would have purchased unaccounted supari and, thereafter, sent the same for grinding to M/S. Gopal Grinding Industries.

? In other words in respect of duty demand of Rs.22.43 crores, there is absolutely no evidence that the said quantity was grinded in the premises of M/S. Gopal Grinding Industries and in respect of duty demand of Rs.18.18 crores there is no evidence that the requisite unaccounted supari was purchased by HSG and thereafter sent to GGI for grinding. Therefore, from both points of view the duty demand on both the counts is wholly unsustainable.

? This submission also gets fortified from the fact that the department has not brought on record any evidence at all to prove M/S. Gopal Grinding Industries had crushed the required quantum of katha or cardamom in order to manufacture the said quantity of unaccounted finished goods and also has not brought any evidence on record to show that other raw materials of the required quantities were also received by HSG.

? In any view of the matter the duty demand of Rs. 22.43 crores and Rs. 18.18 crores is based upon third party documents which have no evidentiary value in the eyes of law unless there is material corroboration of the same from independent sources.

? There are material contradiction in the statement of Mukesh Bajpai who one of his statements dated 6-7-2001 (Exh. 10 page 789) had clearly stated that HSG had purchased supari from M/s. Mahesh & Co. in the year 2000-01 about 3,06,060 Kg. and in the year 2001-02 (till 13-6-02 ) about 1,20,775 Kg in cash where there was no voucher. Even assuming for argument sake it is presumed that duty of Panmasala/Gutkha can demanded only on the basis of one raw material still the duty demand on the basis of said quantity of supari during the year 2000-2001 would to Rs.3,94,27,700.00 and during the year 2001-02 would come to Rs. 2,21,83,286.00. only. Hence in any case total duty demand can ny no stretch of imagination can exceed Rs.6,16,10,986.00.

? Hence, even assuming there was diverstion of Supari from the premises of M/s. Mahesh & Co. to HSG and assuming that statements of Shri Mukesh Bajpai was admissible in law still the Commissioner could not confirm duty demand beyond Rs.6,16,10,986.00 ? It is to be appreciated that it is the department which is relying upon the statements of Shri Mukesh Bajpai.

? Without prejudice to the above submissions the documents relied upon by the department in respect of both these duty demands are clearly hit by the provisions of section 36B(2) of the Central Excise Act which are being explained in a separate head herein below.

(XVII) SUBMISSIONS ON INSTALLED CAPACITY AND CAPACITY OF PRODUCTION; NUMBER OF SHIFTS OPERATED IN THE FACTORY- PAGES 245-253 OF ORDER-IN-ORIGINAL.

? Installation of packing machines from time to time in the factory of HSG were as under :-

04.05.1998: 16 machines

02.01.1999: 9 machines 01.11.1999: 17 machines 19.11.2000: 12 machines Total: 54 machines.

? National Productivity Council report was 72 pouches per minute per machine. (pages 5215/Vol.15 Exh. 127). Based on this report and one shift working, total duty payable was about Rs. 20 crores. As against this, duty of 8.66 crores has already been paid. page 253.

? The aforesaid will hold good if all machines are in operation without any break down or power cut or raw material shortage or labour problem etc., which is almost impossibility.

? The officers of department also drew the panchnama on 24-12-2001 Exhibit 128- page 5228, Vol 15. On this day 25 machines were running and 4 machines were not running. Speed of various machines per minute found to be ranging from 49 pouches to 117 pouches per minute.

? No evidence brought on record that HSG at any point of time increased the capacity of pouches making machines.

? Even when the departmental officers and officers from the National Productivity Counsil visited HSG they did not find any tempering with the pouch making machines in order to increase its capacity of production. Even on the date of search nothing wrong was found with regard to the capacity of pouch making machines.

? On 10-1-2002 a statement of Director Shri M.M. Garg of Rollon Packaging Machines was recorded wherein he had stated catalogue of the machines showed that the speed ranged between 60 to 120 pouches per minute which could be further adjusted. Exhibit 126 pages 5193 to 5198/Vol. 15.

Reliance also placed on 32 sheets Exhibit 39 1/39/32- pages 1942-1973/Vol. 5 & 6 showing production two shifts per day.

? Reliance also placed on statements of Shri Vinod Kumar Verma and Shri Vishnu Kumar Pandey dated 11-10-2001 Exhibit 44 Pages 2099 2103 /Vol. 6 and Shri Vinod Kumar Verma Exhibit 43 pages 2094-98 /Vol. 6.

? Commissioner has arrived at finding that HSG was showing less production.

? Shri M.M. Garg Director M/s. Rollon Packaging Machines was cross-examined (page 6 Vol. 1) in which he stated that the claim of the manufacturer in catalogue about the speed of machine was exaggerated ; that once they had sold the machines they could not verify any adjustment; that in order to maintain constant speed of the machine it required regular maintenance.

? No reliance can be placed on 32 sheets as has been explained in another paragraph that the same were of fabricated nature.

? The evidentiary value of 32 sheets also stands falsified from the cross-examination of Shri Vishnu Kumar Pandey and Shri Vinod Kumar Pandey ? No reliance can be placed on the statement of Shri Mukesh Bajpai as he could not be cross-examined due to his death ? Even Rajneesh Tiwari in his statement dated 4-7-2001 (Page 812/3) had stated that the factory of HSG runs one shift a day from 10AM to 6 PM.

? In any event duty cannot be demanded merely on the basis that a manufacturer has installed certain number of machines. Working capacity of machines can never be synonymous with actual production. The actual production would always depend upon the demand in the market of the final product. Therefore, any reliance on the evidence of installed capacity of the pouch making machine is purely hypothetical and theoretical.

(XVIII) FABRICATED NATURE OF 32 LOOSE SHEETS EXHIBIT 39/1 TO 39/32 IS EVIDENTLY CLEAR AND DULY ACCEPTED BY THE DEPARTMENT IN THEIR WRITTEN SUBMISSIONS ? That the department purportedly seized 32 loose sheets Exhibit 39/1 to 39/32 pages 1942-1950 Vol 5 & 1951 to 1973 Vol. 6 showing daily production for the period 16-5-2001 upto 30-5-2001 which were allegedly seized from the premises of HSG on 4-7-2001. These 32 loose sheets were purportedly showing production of HSG for the period 16-5-2001 to 31-5-2001 and showed that their factory was running two shifts a day.

? The department has tried to co-relate the said production with reconstructed data and tried to project that HSG was manufacturing at least 400 bags per day against the recorded production of 70 to 75 bags.

? The findings of the Commissioner on these 32 loose sheets are found at pages 149 to 151 of the order. According to the department these sheets were signed by Shri Vinod Kumar Verma and Shri Vishnu Narain Panday both employees of HSG. During the period for which these loose sheets pertain HSG had accounted for only 849 bags whereas as per these sheets the production was 6484 bags and hence HSG had suppressed the production to the tune of 5636 bags during the said period of around 15 days.

? In the first place these 32 loose sheets did not bear any signature and hence no reliance could be placed on the same. Secondly HSG had consistently contended that these 32 loose sheets were not seized on 4-7-2001 from their factory as was being made out in the show cause notice. The Commissioner has held at para 30.1.1. page 149 of the order that the loose sheets bore the signatures of Shri Mukesh Bajpai and hence he had accepted the genuineness of 32 loose sheets on that basis.

? However, a bare look at these sheets would clearly reveal that Shri Mukesh Bajpai had put his signature on 25-6-2002 when his statement was recorded and it has been clearly mentioned on these loose sheets that these were seen by him on 25-6-2002 only. This fact is evidently clear by perusal of 32 loose sheets which stand enclosed at Exhibit 39/1 to 39/32.

? It has been all along the contention of the HSG that these 32 loose sheets were never seized from their factory on 4-7-2001. However, the department as well as the Commissioner are of the view that these 32 loose sheets were seized against serial no.188 to Annexure-C to the Panchnama which states description of the seized documents as loose miscellaneous papers filed in a folder. A copy of the panchnama stands enclosed at page 666-684/Vol.3, Serial No.188 is at page 681. A perusal of the same clearly reveals that no details of the purported documents seized vide Sr. No.188 have been mentioned therein. This serial no. nowhere talks of 32 loose sheets but on the contrary there is only a reference of 132 sheets against the said serial. . It would also be observed against all other serial numbers in Annexure-C, the department has specifically mentioned the description of the documents which were seized by them. Further the attendance sheets are specifically mentioned at serial No.189 and 190 of the said panchnama. Hence, there could not be any occasion for these purported attendance sheets to be part of the loose miscellaneous papers. The mere fact that there were certain loose miscellaneous papers containing 132 loose sheets it cannot be assumed or claimed that these 32 loose sheets were part of the same.

? The department has not explained if these 32 loose sheets were part of the loose miscellaneous papers what was the nature of documents in the remaining hundred sheets.

? The department had relied upon the statements of Shri Vishnu Narain Panday and Shri Vinod Kumar Verma wherein they had purportedly stated that these loose sheets showed the list of workers and the production of HSG.

? However, both Shri Vishnu Narain Panday and Shri Vinod Kumar Verma were cross-examined on 8-9-2004 Page 34 & 35/Vol.1. In their respective cross-examination the two witnesses stated that they had signed and put signatures of both dated 16-5-2001 & 11-10-2001 on these loose sheets on 11-10-2001 only. Therefore it is apparently clear that these 32 loose sheets were not seized on 4-7-2001 but are fabricated documents and the signatures of the two employees were taken on 11-10-2001 for the said date and for the previous date i.e. 16-5-2001. The fact that these documents were prepared/got signed from these two employees on 11-10-2001 is evidently clear from the written submissions dated 8-9-2010 filed by the department at page-38 wherein the department itself has admitted as under:-

These sheets were also shown to the production supervisors who prepared the sheets on 11-10-2001 and they had admitted that the sheets were prepared by them. On the same day the aforementioned sheets were shown to Mr. Mahesh Singh who also confirmed the same ? It has been accepted by the department at page-31 of their written submissions where they have categorically accepted that these sheets were shown to the production supervisor who prepared the sheets on 11-10-2001. These submissions at page 31 on the issue of 32 loose sheets are being reproduced below :-

However, the truth of the matter is that production was carried on for two shifts in a day as proved by the 32 loose sheets of production which were recovered from the premises of the Appellant on 04-07-01 pertaining to the period from 16-05-01 to 31-05-01 (Vol. V, p.1942-Vol VI, p.1973). The production figures shown in these loose sheets tally with the production figures shown in the corresponding R-documents (Vol.XI, p.3717-3732). These sheets were also shown to the production supervisors who prepared the sheets on 11-10-01 and they have admitted that the sheets were prepared by them. Vol. VI, p.2094 & 2099). It is also pertinent to mention that the figures of production recorded in the said loose sheets were highly suppressed while recording the production in RGI daily stock account. It was seen that the Pan Masala Gutkha involving duty amount to Rs.1,52,14,500/- was not entered in the records & cleared without payment of duty, during a fortnight only. ? It is, therefore, the departments own case in their written submissions that these 32 loose sheets were prepared by the production supervisors on 11-10-2001 i.e. the day when their statements were recorded. This fact also gets support from the cross-examination of both Shri Vishnu Narain Panday and Shri Vinod Kumar Verma.

? Once the department in their written submissions which have been filed by the Jurisdictional Commissioner has accepted in categorical terms that these 32 loose sheets were prepared on 11-10-2001 there cannot be any doubt that these 32 sheets are fabricated documents which were never seized from the premises of HSG on 4-7-2001 or thereafter. Hence, no reliance can be placed on the same. On the contrary this solitary instance gives clear indication the manner in which false and fabricated case has been made out against HSG.

? Hence the theory propounded by the department and accepted by the department that HSG was manufacturing 400 bags per day but were showing only 75 bags per day in their RG-1 account stands totally falsified. Further the allegations and findings that HGS was running two shifts a day also stands discredited.

? In any event of the matter even assuming for argument sake that these 32 loose sheets are admissible in evidence, no duty has been demanded in respect of number of bags mentioned therein. Further the said evidence which pertains to the period of only about 15 days i.e. 16-05-2001 to 30-05-2001 cannot be applied for past clearances or for subsequent clearances. The same can have any evidentiary value for the period to which these pertained.

(XIX)NON-SEALING OF COMPUTERS/CPUS CLEARLY MAKE THE RELIED UPON DOCUMENTS AS TOTALLY UNRELIABLE ON WHICH NO RELIANCE CAN BE PLACED.

? Almost the entire duty demand is based upon the documents allegedly retrieved from CPUs either by HSG, Anju Agencies & Patel Brothers, Mahesh & Co. M/S. Gopal Grinding Industries etc. ? The computers of all the entities were lying with the department unsealed for a long period of time and hence any data retrieved that too not in the presence of HSG or other parties no reliance can be placed on such data. Therefore, any duty demand based on such data cannot be sustained at all.

? A perusal of the panchnama drawn in the factory of HSG would reveal that though one personal computer was resumed Page-861/Vol.2 but there is no mention that the said computer was sealed.

? Even in respect of panchnama drawn at the premises of Anju Agencies it has been simply stated in the said panchnama that;

the authorities have been taken into their custody CPU containing data relating to this firm (Page 683 of Volume 2).

? Only the panchnama of M/S. Gopal Grinding Industries shows that their CPU was sealed on 4-7-2001 as mentioned in following manner:-

The Officers also resumed the CPU of the computer of M/s. Gopal Grinding Industries. The Officers also sealed the CPU in our presence and the paper seal was affixed on the CPU so that the data in CPU cannot be tampered in any manner (page 2351 of Volume 7).

? Whenever the CPUs were opened during the investigations and during the period when the same were lying with the department there is no evidence on record to show that the same were properly opened and sealed.

? On the question of sealing of the CPU pertaining to Anju Agency, Sh. B.N. Verma, Supdt was cross examined on 8-9-2004. In answer to question No. 8 as to whether CPU of Anju Agency was sealed on 4-7-01, he replied that panchnama was drawn to that effect but about the sealing or re-sealing he would clarify from RUD (Page 45 Vol. 1). He was further/again cross examined on 3-11-04 (page 14 Vo.-1). He stated that he was not in a position to state anything at present beyond what he had stated earlier. Therefore, when the investigating officer who had seized the CPUs of Anju Agency on 4-7-01 was not sure of its sealing on 4-7-01 and there is no mention of any such sealing in the panchnama. The contention of HSG that the said CPU was not sealed on 4-7-01 has to be accepted. Similarly Sh. Amit Parkash, Inspector, was cross examined on 6-9-04 (page 37 Vo.-1). He was asked as to whether he had sealed 14 machines seized on 4-7-01 from the premises of HSG he stated that it was not mentioned in the panchnama that the same were sealed meaning thereby that the same were not sealed.

? On this issue HSG had made vehement contention before the Commissioner that CPUs were either not sealed in the first place or where even they were sealed like in the case of M/S. Gopal Grinding Industries the same were neither properly de-sealed nor again properly sealed during investigations.

? The Commissioner at Page 143 of the impugned order has relied upon certain panchnamas for the first time and has held that the CPU of HSG and other parties were operated several times during investigations.

? It is submitted that majority of these panchnamas have not been relied upon in the show cause notice therefore, these cannot be relied upon for the first time in the order-in-original.

? He is completely silent on the most vital issue about the sealing of CPUs/computers of HSG and Anju Agencies on 4-7-2001 as there is absolutely no evidence on record to show that CPUs of HSG and Anju Agencies were sealed on 4-7-2001. When there was no initial sealing which was most vital aspect in these proceedings drawing panchnamas at many subsequent occasions would be of no consequence.

? As far as HSG, Anju Agencies, M/S. Gopal Grinding Industries and others are concerned, these CPUs went out of their control on 4-7-2001 and remained in the custody of the department for number of months.

? It does not require a long time to manipulate data in the computer.

? Further, the Commissioner is completely silent on the sealing and de-sealing of CPUs of Anju Agencies and M/S. Gopal Grinding Industries etc. ? In any event of the matter when there is a grave doubt on sealing/de-sealing of the CPUs of different entities and the learned Commissioner has not been able to clear the air of doubt on the same no reliance can be placed on any such data retrieved from such CPUs that too when not in presence of either HSG or other parties.

? The department in their written submissions is only talking in general about the sealing or de-sealing of CPUs without dealing with the main submissions that the CPU of both HSG and Anju Agencies were not sealed on 4-7-01 hence no reliance can be placed on any subsequent panchnama when department is not able to establish that these two CPUs on the basis of which majority of duty demand has been raised and confirmed were sealed at the time of their seizure on 4-7-01.

? They have also not rebutted the contention of the HSG and other parties that even the printouts being relied upon by the department were not retrieved in the presence of either HSG or any other co-noticees though the mirror images were taken on 23-1-2002 in the presence of representative of various firms.

? The Honble CESTAT in a recent judgment in the case of Kuber Tobacco Products Pvt. Ltd. Final order No. A/83-110/20120EX[DB] has laid down a clear law in the manner in which panchnamas had to be drawn and the care to be taken while drawing the same. Reliance is placed on paras ? It has been held in clear terms that if there is any doubt on the credibility of the panchmama no reliance can be placed on any documents allegedly seized by the department. Even seized documents have to be duly preserved in a sealed cover so that there is no interference with such documents:

? The panchnama and the proceedings in relation thereto should not leave any room to entertain any doubt as such and for the possibility of any article and/or document by third person or of the scope for interference by strangers with the documents or contents thereof.

? In the absence of such steps being taken in the course of seizure of the documents, certainly credibility of not only of the seizure and recovery but of the material seized and recovered is not free from grave doubts.

? It should not be forgotten that the charge of clandestine removal of goods is of most serious nature and, therefore, requires to be established with cogent evidence. If proved, it can have drastic consequences. Besides, a fair proceeding, with no opportunity to the prosecuting agency to gain advantage of its own wrong or lapse, is the corner stone of our justice system.

? It is submitted these findings are equally applicable to the CPUs seized by the department from the premises of HSG, Anju Agencies and others. The credibility of the documents allegedly retrieved from the CPUs of HSG, Anju Agencies and others stand clearly discredited in view of the numerous circumstances both factual and legal and, therefore, no reliance can be placed on the said documents to fasten serious charge of clandestine removal against HSG.

(XX) DOCUMENTS ALLEGEDLY RECONSTRUCTED BY M/S STELLAR INFORMATION SYSTEMS LTD., FROM ALLEGED DELETED/ DESTROYED DATA IN THE HARD DISKS OF CPUS OF THE APPELLANT, M/S ANJU AGENCIES AND M/S GOPAL GRINDING INDUSTRIES WERE NOT RELIABLE EVIDENCE AND COULD NOT BE RELIED.

? From Panchnamas/ Seizure Lists dated 04.07.2001 the following facts would be evident:

(a) The HSG : Serial Nos. 191 and 192 in the List of records resumed on 04.07.2001 were as under:

191. 14 floppies 3-1/2"

192. 1 Personal computer has been resumed from M/s Harsingar Gutkha (P) Ltd. (page 681 of Volume 2).

(b) M/s Anju Agencies: In Panchnama dated 04.07.2001 it was stated that the authorities have taken into their custody CPU containing data relating to this firm. (page 683 of Volume 2)

The Officers also resumed the CPU of the computer of M/s Gopal Grinding Industries. The Officers also sealed the CPU in our presence and the paper seal was affixed on the CPU so that the data in CPU cannot be tampered in any manner (page 2351 of Volume 7).

? Thus from the Panchnamas and seizure memos it would be evident that CPUs/ floppies/ hard disks resumed from the HSG and from M/s Anju Agencies were not sealed. CPU of Gopal Grinding Industries was sealed by affixing a paper seal.

? In respect of hard disks of CPUs, as would be evident from the report of Shri Himanshu Singh of M/s Stellar Information Systems Ltd, New Delhi (in short M/s Stellar) (pages 1939 to 1941 of Volume 5), the position was allegedly as under:

(a) Shri Himanshu Singh visited Central Excise Office at Lucknow on 23.01.2002 and the hard disks were opened.

(b) Mirror image of hard disks was obtained on the hard drives brought by Shri Himanshu Singh and also on the hard drives provided by the Department.

(c) Mirror images were taken to the laboratory of M/s Stellar at New Delhi and were studied there.

(d) On the said study it was noticed that large number of files have been deleted outrightly or manipulated by way of overwriting. Hard copies of all the files were thereafter obtained out of the re-constructed data and these copies were authenticated by the representative of M/s Stellar.

(e) It was specifically admitted in the Report that any original data which had been later super-imposed could not be retrieved as it is not possible to read original data in this case. It was stated that all data fully deleted has been retrieved. During cross-examination, representative of M/s Stellar admitted the following:

- Data in the said hard disks examined by M/s Stellar was found in contiguous files as well as in fragmented files.

- Their software recovers deleted, fragmented data base files to an extent.

- Their software has got limited capacity of showing whether the file has been over-written or not. (pages 911 of Volume 1).

? Almost the entire order of the Commissioner is based on the documents re-constructed/retrieved by M/s Stellar in the manner aforesaid.

28.5 The HSG filed before the Commissioner an Affidavit of Shri Pankaj Mathur, Director, Technology, Unistal Systems Pvt. Ltd. who has the experience of recovering data from crushed hard disks in more than a lakh cases (pages 196 to 198 of Volume I). In the said Affidavit, Shri Pankaj Mathur inter-alia affirmed as that. As a data recovery expert I understand that output of data recovered after superimposition is never authentic. It is just a partial recovery. This method of reconstruction is useful in cases where commercial information is not there. There is a very high probability that some old data from un-linked clusters may be recovered during the reconstruction process. . Human errors and typographical errors are very common in computer data entry. Any accounting software has complex interlinking, this means that many different files are linked and then actual results are generated. For linking, all files must have original names and must be placed in actual folder path.

HSG submitted before the Commissioner that if he so desires, the HSG was ready to produce Shri Pankaj Mathur for cross-examination (page 186 of Volume 1). The Learned Commissioner, however, chose not to cross-examine Shri Pankaj Mathur.

? It is further submitted that even in the report of Stellar Information Systems Ltd, there is nothing to show as to whether it was possible to detect as to whether the retrieved data or re-constructed data was original data or super-imposed data. In any hard disk operations, if an operator performs delete operations, what is deleted is partition/ boot, root directory and FAT/MFT (i.e., File Allocation Table) and these are just like cover page, index and links/addresses in any book. After such deletion, when new files are created, these result in fresh partition/ boot, root directory and FAT/MFT. New data fed thereafter in these files keep on replacing old data of the earlier files and keep on getting super-imposed on the old data. Link of old data is gone on deletion and the process of recovery/ retrieving is based on logical assumptions. There is always a possibility of merging of old data and mistakes in assumptions which may completely change the results.

? Even otherwise, no reliance could be placed on the report of the M/s. Stellar as there is nothing on record as to from which of the seized CPUs documents were retrieved or reconstructed. In fact when the Department had seized five computers of different entities and stellar had taken mirror images of fall the five CPUs it was incumbent upon them to prepare their report in respect of each CPU separately. This is more so as data retrieved or reconstructed from each CPU had different implications and consequences. Hence, a consolidated generic and non-specific report even otherwise does not command any evidentiary value.

? Print outs from the CPUs were not taken out in presence of either HSG or Anju Agencies or Mahesh & Co. or Gopal Grinding Industries. The report of M/s. Stellar is self contradictory as the different expressions such as data reconstructed, data retrieved, data rebuild as interchangeably being used.

? It has been certified in the said report that all data fully deleted had been retrieved as it was not possible to read the original data in this case. In the case of R-documents it has been claimed in the show cause notice that the said data was deleted hence the R-documents are not in the form in which they might have been fed into the computer. A bare look at the same reveals that these were edited files made by M/s. Stellar and are not in original form. Please see page 3278 onwards Vol-9, Vol-10 and Vol-11 as some of the Exhibits are not the original files.

? Further, in the show cause notice itself it has been alleged that R-documents were reconstructed documents which cannot be compared with retrieval of documents as the same would always be in the original form. Similar is the case with Challans of Gopal Grindings Industries Exh 22A to 22G, 23A, 23B pages 1507-1515 Vol-4; P 2296-2333- Vol 6 & 7.

(XXI) IN ANY EVENT, NONE OF THE CONDITIONS OF SECTION 36B OF THE CENTRAL EXCISE ACT, 1944 WERE SATISFIED AND THE PURPORTED RECONSTRUCTED DATA FROM COMPUTERS AND FLOPPIES SEIZED FROM DIFFERENT PLACES COULD NOT BE RELIED UPON. THERE WAS ALSO NO CORROBORATIVE EVIDENCE.; FINDINGS OF COMMISSIONER AT 158-166.

? Under Section 36B(1), a computer print out can be admissible only if the conditions mentioned in Section 36B(2) and other provisions of Section 36B are satisfied only in relation to the computer printout as well as in relation to the computer in question. Sub-Section (2) of Section 36B is set out below:

The conditions referred to in sub-section (1) in respect of a computer print out shall be the following, namely:

(a) the computer print out containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;

(b) during the said period, there was regularly supplied to the?computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived;

(c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and

(d) the information contained in the statement reproduced or is?derived from information supplied to the computer in the ordinary course of the said activities..

? None of the conditions of Section 36B (2) were satisfied in the present case either in respect of the purported computer printouts or in respect of the seized computers and floppies.

? The purported computer printouts were not produced by the computer in question.

? The said purported computer printouts were also not produced during the period to which the same related.

? There is also no evidence to show that the computers were used regularly to store or process information for the purposes of any activities regularly carried on by HSG or other parties such as Anju Agencies, Patel Brothers, Mahesh & Co. and Gopal Grinding Industries. In fact, in respect of the computers and floppies belonging to and seized from other persons, no presumption of any nature could be raised against HSG nor these could be relied upon against them.

? There is also nothing to show that the purported information contained in the computer printouts were derived from the information supplied to the computer in the ordinary course of HSGs business and manufacturing activities or other parties aforementioned.

? Further and in any event and without prejudice to the aforesaid it is submitted that under Section 36B, the so-called reconstructed or re-built data from the deleted or over-written data are not at all admissible.

? On the other hand, almost the said entire demands in the impugned Order are based on purported reconstructed/re-built data and any such thing is not at all permissible under Section 36B.

? The legislation in its wisdom has imposed strict conditions and limitations before a computer print outs can be treated as a valid piece of document having evidentiary value in the eyes of law. Even the computer experts have used different expressions in their Report - (page 1939 to 1941- Vol.-5).

? Shri Kuljit Singh in his cross-examination dated 25-1-2005, page 911 Vol-1 stated that it was not a reconstruction of data but recovery of data whereas in their report they had used the expression reconstructed, rebuilt etc. Even in the show cause notice it has been stated that the data was reconstructed meaning thereby that the same was not in original form. In the demand relating to 4557 invoices which is more than Rs. 63 crores the copies of any of such invoices were neither relied upon or nor provided to HSG.

? If it would have recovery of data the same should have been in the same form in which it would have been fed in the CPU by respective parties and not reconstructed or rebuilt data.

? The fact that the said data was not retrieved in the same form has been accepted by the department in their written submissions dated 8-9-2010.

? Data reconstructed from the CPU of a third party could not be used against HSG.

? In any event the computers printouts reports were not taken out in front of any of the parties including HSG.

? In respect of data pertaining to Anju Agencies or Mahesh & Co. or Gopal Grinding Industries their computers at no stage were under the control of HSG.

? Mere fact that Anju Agencies or Mahesh & Co. or Gopal Griding Industries were the family concerns of the HSG that does not mean that these computers were in the control of HSG as contemplated under the provisions of Section 36 B of Central Excise Act as all these units were different entities.

? No evidence that computer of Patel Brothers were seized at any point of time.

? The purported multiple challans of Gopal Grinding Industries cannot be used against HSG.

? Further, there are no provisions in law to demand duty on the basis of reconstructed data.

? It has come on record in clear terms that the admissibility of computer print outs has been provided as document and as evidence only in terms of provision of section 36B.

? Section 36B (2) provides the various conditions and circumstances under which a computer print outs can be treated as documents for evidence purposes.

? Therefore, the terms computer print outs has definite connotation.

? It certainly means the original computer print out and not reconstructed documents/data/computer printout.

? In other words there is absolutely no provision under Section 36B to give any legal cover to reconstructed or rebuilt data.

? The reconstructed data or print outs cannot be equated with the original computer data.

? In other words the said computer data should be in the same form in which it was fed in the computer and not in any other form including in reconstructed form or rebuilt form.

? The Legislature has carved out this provision with due deliberation and has put strict limitation and conditions because any information fed in the computer is fraught with several dangers.

(XXII) ADVERSE VIEW AND FINDING CANNOT BE RENDERED MERELY ON THE BASIS OF INCULPATORY STATEMENTS.

In the present case the Commissioner has relied upon simply on inculpatory statements of certain persons without simultaneously considering the exculpatory portions of the same. He has also not considered ithe retractions filed by the makers of the statements and also evidence coming out on record during cross-examination.

It is well settled law that even in respect of inculpatory statements there must be other corroborative evidence in support of the same.

HSG has shown that even the inculpatory statements are not of corroborative nature and are vastly at variance from the actual facts or documentary evidence.

A perusal of various statements would reveal that even some of the inculpatory statements are contradictory to one another hence no reliance can be placed on the same without independent corroboration.

even otherwise the original statements are to be examined or relied upon along with the evidence coming on record during cross-examination.

No reliance can be placed on the statements of the drivers as their cross-examination requested but they did not turn up pages 160/1, 168/1 and 286/1.

In any event the department or the Commissioner could not have relied upon only the inculpatory portions of various statements. A statement is required as to be read as a whole and not in piecemeal.

(XXIII) ENTIRE THE DUTY DEMAND HAS BEEN CONFIRMED ON THE BASIS OF STATEMENTS OF THE CO-NOTICEES.

The statements of co-noticees were not only contradictory but were not corroborated by any independent evidence or material.

The Commissioner had allowed cross-examination of various witnesses including co-noticees. .

Shri Mukesh Bajpai one of the co-noticees died on 1-7-2003, .hence his cross-examination could not take place.

Shri Rajnesh Tiwari did not appear for cross-examination hence his evidence is to be excluded/discarded from consideration.

One of the employees of HSG Shri Amit Srivastava appeared for cross-examination. (page 23-24 Vol-1 dated 9-9-2004). . In his cross-examination he categorically stated that his statements were recorded under threat and duress by the officers. Hence his original statements cannot be relied upon without corroborative evidence in support of the same.

Two of the dealers of Anju Agencies, Papu Salesman and Gupta Trading Co. also stated in their cross-examination that their statements were recorded under threat and pressure.

In any event any statement before being accepted as an admissible evidence in the first place it should be examined from other sources as to what weight should be attached to the same. An admission is not conclusive as to the truth of matter stated therein. It is only a piece of evidence, the weight to be attached to which depends on the circumstances under which it is made. It has been proved beyond any shadow of doubt that there are wide contradictions even in the statements of co-noticees and others. In other words they cannot be said to be of corroborative nature. The Revenue has simply ignored the portion of these statements which are favourable to HSG and others and has relied upon only inculpatory portions of each statement which is wholly impermissible in the eyes of law. Even otherwise numerous contentions of the co-noticees are contrary to the real facts. The Revenue even otherwise has not been able to prove their case which may be in tune with the said statements. In this regard HSG would wish to rely upon the judgment of the Honble Apex Court rendered in the case of Nagubai Ammal and Others vs. B. Shama Rao & Other reported in AIR 1956 SC 593. Copy of the judgment stands enclosed in the compilation of case law.

(XXVI) COMMISSIONER COULD NOT HAVE SIMPLY REJECTED THE EVIDENCE WHICH CAME ON RECORD DURING CROSS-EXAMINATION.

The Commissioner has totally rejected the evidence coming on record during cross-examination.

Cross-examination is allowed only when there is doubt of veracity of the oral statements recorded under statutory provisions.

It was the Commissioner himself who had allowed the cross-examination of various witnesses including co-noticees. Once he allowed cross-examination he could not have simply rejected the evidence coming on record during the cross-examination.

Cross-examination is the most efficacious method to find out the truth.

If the findings of the Commissioner on the cross-examination are accepted there would be no need to allow the cross-examination. If any evidence comes on record during cross-examination the same must be relied upon unless proved to be false evidence.

During the cross-examination proceedings the Commissioner acts as Examination-in-Chief. If he has any doubt on the averment of any witnesses he can contradict him during the proceedings of cross-examination itself.

In majority of the cases the Commissioner has accepted the averments of witnesses made by them during cross-examination, as he never contradicted them.

Wherever he had any doubt he had put queries to the witnesses as it would be evidently clear from the minutes of the cross-examination of various witnesses.

In some cases he had even disallowed a question put to the witness and even to the Departments officers.

(XXV) WITNESSES WHO WERE ALLOWED TO BE CROSS-EXAMINED BUT DID NOT APPEAR FOR CROSS-EXAMINATION THEIR DEPOSITION HAS TO BE EXCLUDED FROM CONSIDERATION; FINDINGS OF THE COMMISISONER PAGE-137 OF ORDER-IN-ORIGINAL.

It is well settled law that once the cross-examination of a witness is allowed and if he does not turn up for such cross-examination his evidence is to be excluded from consideration.

If the revenue wants to rely upon certain statements they have to produce such witnesses for the cross-examination.

If the revenue is not able to produce any witness for cross-examination in adjudication proceedings his/ their statements are not considerable in evidence.

(XXVI) LEGAL PRINCIPLES INVOLVING ISSUE OF DUTY DEMAND ON ALLEGED GROUNDS OF CLANDESTINE REMOVAL OF GOODS With regard to the cases involving clandestine clearances, the legal principles are well settled and these are broadly as under:

Burden to prove clandestine clearances is on Revenue;

Burden is required to be discharged by adducing concrete evidence and not on surmises and conjectures.

In order to prove the charge of clandestine removal of the finished goods the department is requested to bring on record independent, corroborative, concrete and tangible evidence in support of said charge.

Demand cannot be confirmed on mere suspicion. Suspicion cannot take place of proof. Degree of proof required is that of absolute proof.

Department is required to adduce evidence inter-alia relating to the following:

> Receipt of raw materials > Payments for procuring raw materials > Capacity of manufacturer > Electricity consumption > Who were the buyers > Receipt of payment from the buyers Department is required to prove the charge by bring on record clear evidence that the manufacturer has procured all the raw materials clandestinely in proportion to the duty demand confirmed.

Duty cannot be simply confirmed on the basis of theoretical assumptions or calculations.

Charge of clandestine removal is a serious charge and the same has to be proved by the department by bring on record independent, corroborative, unimpeachable, tangible and concrete evidence.

When names of the alleged buyers of clandestinely removed goods are available it was strictly obligatory upon the department to examine them in order to corroborate their case.

None of the above requirements have been fulfilled in the present case. Hence charge of clandestine removal is not sustainable.

(XXVII) SUCH HUGE DUTY DEMAND CANNOT BE SUSTAINED MERELY ON THE THEORY OF PREPONDERANCE OF PROBABILITY OR BY DRAWING UNWARRANTED INFERENCES WITHOUT ADEQUATE PROOF; STANDARD OF PROOF IN THE CASE LIKE PRESENT ONE WOULD BE STRINGENT TEST OF PROOF BEYOND REASONABLE DOUBT AS THE PROCEEDINGS UNDER THE CENTARAL EXCISE ACT ARE CRIMINAL/QUASI-CRIMINAL IN NATURE.

? The Commissioner as well as department in their written submissions filed on 8-9-2010 and duly signed by the Commissioner have contended that standard of proof in such cases is of preponderance of probability and not that of absolute proof.

? It has also been their case that the department is free to draw reasonable inferences and there was plethora of evidence which was circumstantial in nature.

? Such a view on the part of the Revenue or by the Commissioner are wholly contrary to settled preposition of law.

? It has not been appreciated that confirming such a huge demand against assessee only on the basis of circumstantial evidence or on the basis of preponderance of probability not only results in huge financial burden in the shape of duty demand but also results of imposition of equal amount of penalty on the manufacturers and varied amount of penalties on co-noticees. This further results into another very serious consequence that is prosecution which is in the nature of criminal liability as provided under Section 9, 9A, 9AA of the Central Excise Act. The Directors of the manufacturing companies and other co-noticees are liable to prosecuted both as Directors of the company and also in their individual capacity as would be evidently clear by perusal of Section 9 and 9AA of the Central Excise Act. If a person is held to have violated these provisions it gives power to the Court to publish their names and there is always a presumption of culpable mental state under these proceedings. Hence, the charges under Sections 11A, 11AC, Section 9, 9A, and 9AA of the Central Excise Act are equated with a criminal charge and, therefore, standard of proof would not be mere preponderance of probability as in civil action but needs a strict proof beyond a reasonable doubt as in a criminal trial.

? Hence, it cannot be held that the charge of clandestine clearances or removal stands confirmed merely on the basis of circumstantial evidences or on the basis of preponderance of probability as has been done by the Commissioner and even claimed by the Revenue in their written submissions.

? On the contrary the same required stringent test of proof beyond reasonable doubt. Otherwise, a serious prejudice is sure to be caused which results without any doubt not only a manufacturer with huge financial burden but also entails criminal liability/trial. Hence, confirming the duty demand and imposition of penalties on mere presumption of probability would not be enough but should have been proved by clear, cogent and credible evidence.

? The Honble Apex Court in the case of Vinod Solanki Vs. Union of India, reported in 2009 (233) E.L.T. 157 (S.C.) was dealing with the issue of violation of various provisions of Foreign Exchange Regulation Act, 1973 and imposition of penalty thereunder. The Honble Apex Court in Para 17 of their judgment held in clear terms that proceedings under (FERA, 1973) are quasi criminal in nature. It has also been held that Section 50 of the Act was a penal provision prescribing that in the event of contravention of any of the provisions of the Act or of any rule, direction or order made there under, a penalty not exceeding five times the amount or value involved in any such contravention may be imposed. Copy of this judgment stand enclosed in the compilation of case law.

? It must also be remembered that the criminal proceedings are launched only as a consequence of demand of duty under Section 11A of the Central Excise Act. .

? The Honble Apex Court in the case of Tukaram.S, Dighole Vs. Manikrao Shivaji Kokate, reported in 2010 4 Supreme Court Cases 329 was dealing with issue of election petition. It was alleged therein by the rival candidate that the respondent had made appeal to voters to vote on communal ground. In support of the case he had placed on record VHS cassettes which according to him was obtained by him from the Election Commission. After hearing the rival submissions the Honble Apex Court has laid down the following prepositions of law:

(a) A mere production of VHS castes was not sufficient. Further evidence was required to be adduced to prove as to how the said cassettes were obtained by the appellant.

(b) In that case the charge of corrupt practices is equated with a criminal liability and, therefore, standard of proof would not be preponderance of probabilities as in a civil action, but proof beyond reasonable doubt as in a criminal trial.

(c) If stringent test of proof is not applied, a serious prejudice is likely to be caused to the successful candidate whose election would not only be set aside, but he may also incur disqualification to contest an election for a certain period, adversely affecting his political carrier. Thus, a heavy onus lies on election petitioner to prove charge of corrupt practice in the same way as a criminal charge is proved. In the absence of any cogent evidence regarding the source and the manner of its acquisition, the authenticity of the cassette was not proved and it could not be read in evidence despite the fact that the cassette is a public document. No relevant material was brought to our notice which would impel us to hold that the finding by the Tribunal is perverse, warranting our interference.

? The law laid down by the Honble Apex Court the aforestated Tukaram S. Dighole case is squarely applicable to the facts of the present case in as much as even in the present case the department has not brought on record proof beyond reasonable doubt to substantiate their allegation about the alleged clandestine removal of finished goods. The starting point for making out a case for such colossal duty liability is based upon 56 photocopies of allegedly invoices provided by the informer and 18 copies were allegedly provided by the Trade Tax Department. The Trade Tax Department also allegedly provided photocopies of challan No.6 of Gopal Grinding Industry. The entire duty demand has been based upon unacceptable and circumstantial evidence. The action of the department has not only resulted in a huge financial burden on HSG and others but also has resulted in penal action which is equal to the duty demand and also separate penal action on the Managing Director and Director. It is the result of these documents which has also resulted in launching of criminal prosecution against the HSG, its Directors and also against other co-noticees. Though in the case of Tukaram S. Dighole the same only entailed in setting aside of the election of the candidate which was under challenge and also disqualification of the candidate from fighting of election for a certain period but in the present case the results are much more disastrous both in financial terms and from the point of view of criminal liability as stated above. In spite of the fact that there was no criminal liability even if the election of a candidate was quashed but the Honble Apex Court in the said case of Tukaram, S. Dighole still held that the proof in such cases would not be preponderance of probabilities as in civil action but a proof beyond reasonable doubt as in a criminal trial. The laid down by the Honble Apex Court in this case, therefore would be applicable on all fours to the facts of the present case. Copy of the judgment stands enclosed in the compilation of the case law.

? The Honble CESTAT in the case of Chandan Tobacco Co. Vs. Commissioner of Central Excise, Vapi, reported in 2011 (270) E.L.T. 87 (Tri.-Ahmd.) in Para-9 has held in clear terms that the Charge of clandestine removal is a quasi-criminal and serious charge and is required to be proved by production of positive and tangible evidences. The inferences drawn on the basis of calculations cannot be made the basis for fastening of charge of clandestine removal. Copy of the judgment stands enclosed in the compilation of the case law.

? The same view has been taken by the Honble CESTAT in a recent judgment of Pan Parag India Ltd. Final Order No. 621 to 625/2012-Ex(BR) dated 23-5-2012 wherein this issue has been discussed in detail in para 50 of this Order. Copy of this final Order stands enclosed in the compilation of case law.

? It is very strange on the part of the Revenue to contend in para 20 of their written submissions that the judgment relied upon by HSG on this issue are older case laws whereas there is a change in the perspective of courts towards clandestine manufacture and the standard of proof expected to be satisfied with respect to the same. Such an arguments on the part of the department is nothing short than a preposterous and perverse argument. HSG has quoted numerous judgments on the degree of standard to proof required in such type of cases and many of these judgments have been upheld by the Honble Apex Court. Such an argument advanced by the Revenue is also wholly out of context and is of extraneous nature. Even the HSG in fact has quoted numerous recent judgments of the Honble CESTAT and Apex Court wherein it has been clearly laid down that standard of proof in such type of cases cannot be merely a preponderance of probability but standard of proof should be beyond reasonable doubt. HSG has relied upon the numerous judgments which are as recent as delivered in the year 2012 wherein it has been clearly held that charge of clandestine removal is a serious charge and, therefore, must be proved by bringing on record corroborative, independent and cogent evidence. In fact the Revenue has accepted time and again in their written submissions that the evidences available with them are of circumstantial nature meaning thereby there is no direct evidence showing clandestine removal of the goods. This fact is also evidently clear from their submissions in para-14 of their written submissions at Page-26 wherein they have conceded in clear terms that If the Court hold that on the totality of facts and evidence that there has been clandestine manufacture of gutkha, then the final demand amount may be restricted only to total amount of unaccounted gutkha that may have been cleared during the period mentioned. If however, the Court were to hold that only where evidence has been led to prove specific instances of clandestine manufacture, then on the strength of that particular evidence the separate individual demands may be upheld. Without prejudiced to the aforesaid, if the Court were to consider the instance of duplicity of demand as mentioned by the Appellant in para 18.8 (i), Para 18.9 and Para 18.10, the Court may be pleased to uphold those parts of the demand for which evidence has been suitably led, and the remand the matter to the assessing officer for re-quantification, subject to the assessee being required to pre-deposit the amount for which the demand was upheld in order to protect the interest of the Revenue. The above submissions clearly summarize the whole case set up by the Revenue. They have admitted in categorical terms that the present case has been basically made out purely on insufficient and circumstantial evidence. The tenor of their prayer makes it evidently clear that even Revenue is of the clear view that the duty demand confirmed by the Commissioner is highly exaggerated, fanciful and wholly unsustainable. Therefore, the Revenue cannot be allowed to make contradictory and self defeating arguments and still allowed to get away with the falsicity of the case set up by them.

(XXVIII)THE DEPARTMENT HAS ERRONEOUSLY RAISED THE ISSUE OF PREPONDERANCE OF PROBABILITY WHICH IS WHOLLY INAPPLICABLE TO THE FACTS OF THE PRESENT CASE.

The Commissioner in his order and the department in their written submissions have relied upon numerous judgments please see para-7 of their written submissions. According to the Revenue to prove in the case like present case is preponderance of probability. It has basically placed reliance on the judgment of Honble Apex Court rendered in the case of Collector of Customs Madras Vs. D. Bhoormull- 19083 (13) ELT 1546 (SC) etc. It is submitted that such a contention on the part of the Revenue is wholly fallacious and cannot be accepted on its face value. It is a well settled law that charge of clandestine removal is a serious charge and must be proved by independent, corroborative and logical evidence. The theory of preponderance of probability can at best be brought into picture only when strong evidence is available pointing out to the clandestine clearances with only a few insignificant evidences/links missing. But where there is no evidence at all proving clandestine clearances, jumping straightway to the judgment of D Bhoormull would lead to drastic results wherein an innocent manufacturer will stand proved guilty even when he has not committed any offence.

The theory of preponderance of probability will have no applicability as in a case of alleged clandestine clearances of the goods. In such a case conclusions must be arrived at which must necessarily be logical, and borne out from the records but not from unwarranted assumptions and on the basis of figment of imagination. In other words the same cannot be merely on the basis of assumptions, presumptions and conjectures. The theory of preponderance of probability has to establish that the goods were clandestinely manufactured and removed by a manufacturer.

In any view of the matter, the reliance has been placed consistently by the department on the judgment of D. Bhoormull but the Courts and the Tribunal has invariably distinguished the same by holding that the judgment in the case of D. Bhoormull relates to the goods which were found to be smuggled goods. In this regard, HSG would wish to rely upon the judgment of the Honble Apex Court in the case of Konavalov Vs. Commander, Coast Guard Region reported at 2006 (197) ELT 3 (SC). This judgement related to the right of seamen to wages under the Maritime law. Some contraventions were alleged against a vessel. The revenue had placed reliance on the judgment of D. Bhoormul. The Apex Court in Para 19 of their judgment held as under:

The Division Bench of the High Court reaches the said conclusion on the basis of the proposition that the confiscation of the goods are proceedings in rem and that once an order of confiscation is passed, it operates against all even if they are not parties to the proceedings. Reliance was placed upon Shewpujanrai Indrasanrai Ltd. v. The Collector of Customs & Others - (1959) SCR 821 and Collector of Customs, Madras and Ors. v. D. Bhoormul - (1974) 3 SCR 833 by the Division Bench. In our view, the reliance placed by the Division Bench is inappropriate. Neither of these cases concern or relate to the assertion of Maritime liens or seamens wages which are protected both under the Admiralty Law and the Merchant Shipping Legislation. The said judgments also relate to goods which are found to be smuggled goods. They can have no manner of application to the confiscation of the vessel, which, in our view, is subject to several rights and interests.

In view of the law laid down when the Honble Supreme Court has held in clear terms that the judgment of D. Bhoormul related to the goods which were found to be smuggled goods. It has absolutely no applicability to the facts of the present case where it has to be established beyond any reasonable doubt that the HSG had indulged in clandestine manufacturer and removal of the finished goods and in order to prove the same there are several parameters which have to be kept in mind and it has to be proved that the manufacturer had received unaccounted raw material, used the same in the finished goods and cleared the same without payment of central excise duty. The facts of the present case clearly show that there is absolutely no sufficient and corroborative evidence to prove this charge.

It has also been held time and again by the CESTAT that in the case of D. Bhoormul sufficient evidence was available to raise presumption with regard to the smuggled nature of the goods. The totality of circumstances reinforced by the inferences arising from the conduct of Bhoormull could reasonably and judicially lead one to conclude that the goods had been illicitly imported into Madras Sea Port. In this regard the appellant would wish to rely upon the judgment of the CESTAT rendered in the case of R.A. Castings Pvt. Ltd. Vs. CCE, Meerut-1 reported at 2009 (237) ELT 674 (Tri. Del.) wherein the judgment of D. Bhoormull was distinguished on the aforestated premise. This judgment also dealt with clandestine manufacture and removal of goods on the basis of electricity consumption. The CESTAT held in clear terms that duty demand was based on theoretical calculation and therefore was not sustainable. In order to prove the charge of clandestine removal, the department has to produce evidence of receipt of unaccounted raw material, manufacture of the goods, its transportation and payments and receipt of alleged suppressed production. Hence the demand was set aside.

The Revenue had challenged this judgment before the Honble Allahabad High Court and the Allahabad High Court in their judgment reported of CCE, Meerut-1 reported at 2011 (269) ELT 337 (All) upheld the judgment of the CESTAT. Still not satisfied with the judgment rendered by the Allahabad High Court the department filed a civil appeal before the Apex Court. The Apex Court in their judgment reported in 2011 (269) ELT A108 dismissed the revenues appeal. Copies of the these judgments stand enclosed in the compilation of case law.. In view of the law laid by the Tribunal in the case of R.A. Castings which has been upheld by the Allahabad High Court and the Supreme Court, no doubt is left that the judgment of the Supreme Court in the case of D. Bhoormull has no applicability at all to the facts of the present case.

Even on this proposition reliance is placed on the judgment of Pan Parag (India) Ltd.- Final Order No.A/621-625/2012-EX (BR) dated 23-5-2012.

Therefore, reliance of any other judgment which is based on this principal can also has no applicability in cases of this type.

In any view of the matter the facts of each case are different from one another. The weight of evidence in each case is also different. Hence no blind reliance can be placed on any judgment either by the assessee or by the department.

(XXIX) MULTIPLICITY OF DUTY DEMAND ? That, there is absolutely no doubt that the department had demanded duty on the ground of clandestine removal again and again on same allegedclearances resulting in huge multiplicity of demand. This is without prejudice to the fact that there is no evidence at all of any clandestine clearances.

? In this regard it would be duly observed that the department has demanded duty on the ground that M/s. Mahesh & Company had sold unaccounted supari to the HSG in cash. There is a duty demand on this aspect from the HSG though there is absolutely no evidence that the said supari was diverted to HSG and used by them in the manufacture of finished goods allegedly cleared clandestinely.

? Again duty demand has been confirmed on the ground that HSG got supari crushed from M/s. Gopal Girding Industries on job work basis which was not recorded in the statutory records of HSG.

? Another demand has been raised on the ground of retrieval of R-documents from the CPU of HSG though there is no evidence of such documents having been taken out of the computer of HSG. Even otherwise such R-Documents are not relatable to HSG in any manner.

? There is fourth demand on the ground that the HSG had supplied unaccounted finished goods to M/s. Anju Agencies and M/s. Patel Brothers and duty has been demanded from HSG on the ground that the M/s. Patel Brothers and M/s Anju Agencies the sole selling Agents of HSG had cleared on an average 70 bags to their customers while the invoices were issued only for 1 to 5 bags.

? It would be duly observed that even the special counsel appointed by the department had contended before the Honble CESTAT while arguing the stay application that duty demand could not be less than 60 crores which itself proves gross inflation of duty demand.

? However, the Commissioner on the basis of highly wild assumptions and presumptions has confirmed duty on the alleged ground of use of one raw material i.e. supari, on the basis of purported R-Documents and also on the basis of finished goods sold by the sole selling agents.

? This has resulted in huge multiplicity of duty demand and the learned Commissioner has done a great disservice by simply confirming such duty demand without any application of mind. He has totally abdicated his duties expected from a quasi-judicial authority who is expected to pass quasi-judicial order in a very transparent, fair and unbiased. However a bare reading of the impugned order shows exactly the opposite.

? In fact the department in para-14 of their written submissions dated 08-09-2010 has clearly conceded that there is a multiplicity of duty demand. Though in the opening sentence of this para it has been clarified that there was no duplicate or multiplicity in the demand of duty, however, while dwelling on this issue further it has contended as under :

It is reiterated that there is no duplication or multiplicity in the demand of duty. It is submitted that wherever evidences were recovered during the course of the investigation to prove clandestine manufacture and removal, on the basis of which a part of the concealment and clandestine manufacture could be proved, to that extent separate demands have been made. If the Court holds that on the totality of facts and evidence that there has been clandestine manufacture of gutkha, then the final demand amount any be restricted only to total amount of unaccounted gutkha that may have been cleared during the period mentioned. If however, the Court were to hold that only where evidence has been led to prove specific instances of clandestine manufacture, then on the strength of that particular evidence the separate individual demands may be upheld. Without prejudiced to the aforesaid, if the Court were to consider the instance of duplicity of demand as mentioned by the Appellant in para 18.8 (i), Para 18.9 and Para 18.10, the Court may be pleased to uphold those parts of the demand for which evidence has been suitably led, and the remand the matter to the assessing officer for re-quantification, subject to the assessee being required to pre-deposit the amount for which the demand was upheld in order to protect the interest of the Revenue. The above submissions are crystal clear as the Revenue in no uncertain terms has impliedly conceded that there is a multiplicity of demand of duty in the present case which is even otherwise clearly borne out from the manner in which duty demand has been raised and confirmed. It is the strong contention of HSG that duty demand is wholly capricious, arbitrary, tangential and wholly contrary to the actual facts. The same has been confirmed in most brazen manner without having any regard to the actual facts.

- This position has been graciously accepted by the learned Soliastor General during the course of arguments on 18-2-2013 when he had arguned that once the Revenue had demanded during on the basis of one raw material i.e. Supari, there would be no justification to again demand duty at the statge of production or clearance of finished goods as according to him it is from the ras material itself the final product is manufactured.

(XXX) OTHER SUBMISSIONS:

It would be duly observed that in the present case the learned Commissioner has not acted at all judicially or legally.

He has not performed his job as an independent judicial authority.

He confirmed almost all the allegations without taking into account the legal principles which were necessarily to be taken into account to come to any independent conclusion about the alleged duty evasion on the ground of clandestine removal.

He has totally acted arbitrarily and his order is based simply on whims and fancies.

Majority of the findings of the learned Commissioner show total arbitrariness in which he has passed the impugned order.

That, no reliance can be placed on the oral evidence when the same is not of corroborative nature and does not co-exist with the documentary evidence.

It is further submitted that if the oral evidence does not co-exist with the documentary evidence or is contrary to the documentary evidence, no reliance can be placed on such evidence.

Documentary evidence always prevails over oral evidence.

That, even otherwise it is wholly unthinkable that for a company whose capital and reserves aggregate to about Rs. 82 lakhs and whose net profit as per audited Profit and Loss account is around Rs. 15-20 lakhs could indulge in such a huge evasion of central excise duty as held by the learned Commissioner.

The demand is about 335 times of HSGs total paid up share capital and reserves.

The demand of duty is about 34 times the duty annually paid by HSG. This fact is itself sufficient to come to a conclusion that the duty demand is wholly exaggerated, duplicated and wholly beyond realities.

That, it is a well settled law that the charge of clandestine removal is a serious charge and must be proved by the department beyond any shadow of doubt by bringing on record independent, corroborative, tangible and acceptable evidence. Further, the onus to prove the said charge is always on the department.

In the present case no such independent and corroborative evidence has been brought on record to prove that the HSG had manufactured and cleared gutkha commensurate to the duty demand confirmed by the learned Commissioner.

There is absolutely no evidence on record that HSG procured proportionate quantities of raw materials that too of hundreds of crores of rupees, used the same in the manufacture of finished goods and cleared the same clandestinely.

The whole case of the department is purely based on theoretical calculations. Any duty demand based on such theoretical calculations cannot be sustained at all.

The learned Commissioner has totally mis-directed himself by not appreciating this vital aspect of the matter and has gone on to confirm the duty demand again and again purely on assumptions, presumptions and conjectures.

? No evidence has been produced for the receipt of the huge quantity of raw-material required for production and clearances of Gutkha involving duty demand of Rs.137 crores. No investigation regarding finances required for such huge turn over has been conducted. There is not any seizure of cash from any premises.

? In respect of the R-documents when the employees of the HSG and Shri Mahesh Singh had categorically denied having prepared the same it was highly incumbent upon the department to have brought independent and corroborative evidence to bring home the allegation of clandestine removal.

? Though numerous statements of Shri Mahesh Singh Director of the HSG and also its employee were recorded but there was no meaningful and clear question put to these persons about the source of alleged procurement of unaccounted raw material or clearance of finished goods without accountal and the quantity thereof.

? There was absolutely no investigation as to how the alleged unaccounted raw material was procured and from whom and how the same was transported to the HSGs premises.

? There is absolutely no investigation as to who are the alleged buyers of the allegedly clandestine removed goods.

? The allegation of clandestine removal cannot be conceived at all unless there is evidence on receipt of unaccounted raw material, conversion of the same into finished goods and clearances of the same without payment of duty.

? This is a universal fact that without the receipt of unaccounted raw material the finished goods cannot be manufactured and cleared.

? The investigating officers were fully aware about the names of the buyers of the raw materials and the dealers to whom M/s. Anju Agencies and M/s. Patel Brothers were selling their finished goods but even a single statement of their was recorded though the department had recorded statements of around 14 dealers out of 16 dealers in respect of some of the 72 invoices.

? The Revenue in their written submissions has dealt with the above submissions of HSG in a very irresponsible manner. In this regard their submissions can be found at page-33 wherein it has been stated that such a enquiry was irrelevant considering that the sole selling agents were the extended arms of HSG. Such a submission is nothing but a very crude attempt to cover up the lapses on the part of the investigating officers who conducted investigations in a highly lopsided manner and the Commissioner on the basis of such investigation has illegally confirmed a colossal duty demand without bringing on record any independent and corroborative evidence. It was the contention of HSG that no buyer of the goods was queried as to whether they had received such huge quantity of unaccounted finished goods. The issue of sole selling agents has been brought on record merely a ploy to distract from the real issue.

? Not even single evidence has been brought on record to prove that the HSG was receiving unaccounted raw materials and clearing finished goods clandestinely.

? There is absolutely no evidence on record that either Patel Brothers or Anju Agencies received any unaccounted cash from their dealers and in turn handed over the same to HSG.

? There is also absolutely no evidence on record that any dealer paid such huge cash to HSG directly.

? There was absolutely no seizure of any unaccounted cash either from premises of HSG or Anju Agencies or any of their dealers on 4-7-01 or thereafter.

? There cannot be denial of fact that if HSG was indulging in clandestine removable of finished goods at such a large scale there was bound to be available unaccounted cash at levels or the time of visit of the officer at various premises on 4-7-2001.

? The non-seizure of unaccounted cash itself is a strong proof that HSG was not indulging in any clandestine removal of finished goods. Even otherwise no flow back of cash has been proved either from HSG to their raw material suppliers or from the dealers of finished goods either to Anju Agencies/Patel Brothers or to HSG.

? It is a hard fact that HSG could arrange with great difficulty funds of Rs. 1 crore which were deposited with the department subsequent to the search operations.

? It must be appreciated that the employees of HSG and M/s. Anju Agencies namely Shri Rajneesh Tiwari, Shri Mukesh Bajpai and Shri Amit Srivastava were all taken to the Central Excise office in the late evening of 4-7-2001. Their statements were recorded in the Central Excise office in the late nights of 4-7-01 and 5-7-01. They were allowed to leave Central Excise office next night at about 9.30 P.M. Their further statements were recorded and thereafter they were arrested. Obviously these statements could not be voluntary in nature. This fact has also been proved from the retraction letter dated 26-07-2001 of Sh. Mahesh Singh and from the cross-examination of various witnesses such as Shri Amit Srivastava, Shri Ashish Misra and Shri Anjni Kumar and others. This fact also stands proved from the Affidavit of Shri Mukesh Bajpai- page 297/Vol.1.

? That, foresenic investigation was not done in the presence of HSG.

? The data was retrieved in the office of M/s. Stellar Information Systems Ltd., at New Delhi, much after the seizure of the CPUs from the premises of HSG, M/s. Anju Agencies and others without the presence of any representative of HSG or other co-noticees.

? Even the CPUs were not properly sealed; therefore, making the so called retrieved data to be highly suspect and unworthy of any evidentiary value.

? The method adopted by the department/investigating officers has completely discredited the entire investigations of the case. Hence, no reliance can be placed on such half hearted/half baked investigations.

? The documents relied upon by the department can at best be treated as secondary evidence and not primary evidence.

? Admissibility of a document or contents may not necessarily lead to any inference unless contents thereto have some probative value.

(XXXI) THAT THE DEMAND OF DUTY ON THE SEIZED MATERIAL EITHER IN FACTORY OR IN TRANSIT OR ON THE BASIS OF BAGS SEIZED AT ANJU AGENCIES IS NOT SUSTAINABLE [ PAGE 327-342 OF O-in-O] ? Duty demand of 55 bags lying inside the factory on 04-07-2001 were not liable to confiscation as it was same days production.

? Proposal to demand duty on 306 seized bags from Anju Agencies, one bag seized from Papu Salesman , 30 bags seized from Ansari Kirana Stores and 140 bags seized in transit is not sustainable as these goods were seized from third partys premises. There is no evidence that HSG had cleared these goods without payment of duty.

(XXXII) THE ORDER ON CONFISCATION OF SEVEN VEHICELS IS EX-FACIBAD IN LAW; FINDINGS ON PARA 57 PAGES 342 TO 346 OF O-IN-O. ? A perusal of the show cause notice dated 11-12-2002 which was in respect of seven vehicles related only to 72 invoices. The Commissioner himself has not accepted the varacity of 72 invoices as he has confirmed the demand on the basis of 70 bags per invoice when the actual quantity varied from 15 to 150 bags per consignment. The various submissions made in para IX is reiterated. There is no evidence at all that these vehicles were used for clandestine clearance of the finished goods. Anju Agencies or earlier Patel Brothers had cleared at lease 472 consignments of 10 or more bags in each vehicle during the disputed period. A chart of this effect stand produced at page 50 of these written submissions.

(XXXIII). NO PENALTY SUSTAINABLE AGAINST SHRI MAHESH SINGH ? The findings of the Commissioner where he has gave reasons for imposing penalty on Shri Mahesh Singh are contained in para 55.1/page 253 of O-in-O. ? A perusal of various submissions hereinabove would clearly establish that no duty demand is sustainable against HSG.

? Once duty demand against HSG is not sustainable there is no question of penalty being sustainable against Shri Mahesh Singh.

? In any event there is no inculpatory statement on beghalf of Shri Mahesh Singh. Even in the first statement dated 25-7-2001 he was forcibly asked to cross the word disagree and writ agree with the statements of employees of HSG and Anju Agencies.

? Even this statement was retracted by him next day i.e. on 26-7-2001.

? All the findings of the Commissioner against Shri Mahesh Singh have been suitable rebutted in the forgoing paragraphs.

? The mere fact that shri Mahesh Singh was overseeing the operations GGI or Anju Agencies cannot be a ground to impose penalty upon him.

? Even the family members can operate various units and the same is perfectly in the frame work of law.

? Hence there is no merit in the findings that various units were established with sole opective to facilitate.

(XXXIV). REBUTTAL OF SUBMISSIONS MADE BY THE LEARED SOLICITOR GENERAL, MR. MOHAN PARASARAN.AND THEIR WRITTEN SUBMISIONS.

* In the first place it is submitted that the learned Solicitor General appearing for the Department had put forth his arguments in detail on 18-02-13. The learned Solicitor General graciously accepted before the Honble Bench that once the Revenue had demanded duty on the basis of one raw material i.e. supari, there would be no justification to again demand duty at the stage of production or clearance of finished goods as according to him it is from the raw material itself the final product is manufactured. Therefore, any submission by the department contrary to the above averments either in the earlier submissions or subsequent submissions cannot be accepted at all.

* That, apart from the written submissions dated 8-9-2010 the following further written submissions stand filed from the side of the department from time to time.

(A) Synopsis dated 02-11-2012 filed by Sh. N. Meyyappan, Assisting Counsel under the covering letter of Shri Jai Bhagwan Supdt. (AR) ( copy enclosed as marked as ANNEXURE- 7 ).

(B) Synopsis dated 3-12-12 duly vetted by the learned ASG Mr. Mohan Parasaran (as he was then) and filed under the signature of Sh. N. Meyyappan in pursuance to direction of the Bench given on 5-11-2012 wherein the department was directed to bring on record the evidences in support of their case. (Copy enclosed & marked as ANNEXURE- 8) (C) Synopsis in the form of notes for arguments submitted by the learned SG at the Bar on 18-2-2013 at the time of personal hearing (Copy enclosed and marked as ANNEXURE-9) (D) Three different Synopsis handed over by Sh. N. Meyyappan to the undersigned on 4-3-2013 styled as under:

(i) Evidence Pertaining to Procurement of other raw materials in addition to Supari.

(II) List of Evidences with respect to All Demands confirmed by the OIO.

(iiI) Submissions on legal issues on behalf of the respondent.

(Copies enclosed and marked as ANNEXURE-10A, 10B and 10C respectively)

(i) SUBMISSIONS IN REPLY TO SYNOPSIS FILED ON 02-11-2012 * In these submissions, the respondent itself has accepted that the standard of proof is that of preponderance of probability and not that of absolute proof. This submission of the Respondent is not sustainable at all as the Honble CESTAT has held in clear terms in numerous cases that the allegation of clandestine removal is a very serious charges and the same has to be proved by bringing on record independent, corroborative, tangible and positive evidence. The undersigned counsel during the course of argument handed over three volumes of case laws wherein in many judgments this principle has been explained in detail. The undersigned counsel drew the attention of the Honble Bench to the final order in the case of Pan Parag India Ltd. (final order No. 621-625/12 dated 23-5-2012 listed at S.No. 26 VOL. III of the compilation) and also that of Kuber Tobacco (P) Ltd. (final Order No. A/83-110/2012-EX(DB) listed at S.No. 117 of Vol.III of the compilation of case law. There are other host of judgements on this issue and some of these judgemenets have been upheld by the Honble Supreme Court.

* The arguments of the Respondent that there are 13 demands of duty and the all are sustainable and meet the test of preponderance of probability. This submissions on the part of the Respondent makes it evidently clear that they do not have any direct, positive and tangible proof in support of their case. The Respondent has contended that re-constructed data retrieved from the seized hard discs are relevant, reliable and admissible evidence under section 36B of the Central Excise Act. HSG has made detailed submissions on this issue which would clearly prove that no reliance can be placed on re-constructed data due to several reasons. It is their submission that statements of the co-noticees cannot be objected to by the HSG as the same has been corroborated by a plethora of evidence in the form of records and statements. This submissions on their behalf is also wholly incorrect as even the inculpatory statements of various co-noticees are materially contradictory which is wholly fatal to their case. Therefore, no reliance can be placed on such type of statements. The contention of the Revenue that there is no multiplicity of demand as each demand is based on separate set of evidence and independent set of evidence stands negated by the submissions at Bar by the learned SG wherein he himself conceded that once the department had raised duty demand on the basis of one raw material thereafter no demand can be raised on the finished goods.

(ii) SUBMISSIONS IN RESPECT OF THEIR SYNOPSIS DATED 3-12-12 * These synopsis were filed on the direction of the Honble Bench dated 5-11-12 where they were directed by the Tribunal to bring on record all the evidences on which they had placed reliance. In this synopsis they have basically listed the evidences starting from the raw material and of the finished goods. In these submissions the Respondent has notably submitted that apart from that the HSG was purchasing suparai and katha from Mahesh & Co. and other raw material from four other parties, namely; katha from M/s. Awadh Wood Products and M/s. Indian Wood Product, Lamination from M/s. Flex Industries and AVS Rotopack. The significance of this submission on the part of the department is that they have accepted that HSG was procuring these raw materials only from the aforestated five parties/suppliers and not from any other party. They have also accepted that there were only 16 dealers in areas around Lucknow who were receiving Harsingar Brand pan masala and Gutkha from HSG under the cover of bill of their sole selling agents. This fact would also establish that apart from these 16 dealers the sole selling agents did not sell any gutkha or pan masala to any other party. It has been argued in detail by HSG that these 16 dealers were issued show cause notice only in respect of 72 invoices. Even no statement from two dealers namely; Jaiswal Stores and Madhur Mohan Arjun Kumar were ever recorded. Even majority of the dealers have denied having received any gutkha on such invoices. Therefore, once the department itself has not been able to prove any clandestine removal to these 16 dealers question of any duty demand would not arise at all.

(iii) SUBMISIONS IN RESPECT OF NOTES FOR ARGUMENT SUBMITTED BY SG ON 18-02-13.

* In the said notes for argument, the learned SG has tried to justify the duty demand at the procurement stage, grinding stage, production stage and clearing stage. But with the same breath he had graciously conceded that once the duty demand has been demanded by the department at procurement stage, the duty cannot be demanded again at production stage and clearance stage. It is the case of the HSG that even at procurement stage, there is no sufficient and tangible evidence that Mahesh & Co. had diverted about 14.08 kgs. of suparai during 1998-99 and 2000-01 to HSG as no adverse presumption can be drawn merely because Mahesh & Co. had sold the said suparai on cash basis. Even there is no allegation or evidence that the said Suparai was grinded in GGI as grinding of Suparai of proportionate quantity is most vital manufacturing process to be undertaken by any gutkha/pan masala manufacturer. Though in support of their contention the Respondent has placed reliance on the various statements but unfortunately they have only relied upon those portions of inculpatory statements which are favourable to them. There is no answer to these portions of the statements which are in favour of HSG and other co-noticees. Similarly in respect of grinding done by GGI it has been argued by them that the duty of Rs. 18.10 crores is for the period 12-8-1999 to 26-05-2000 only. If that is the case, they have not explained as to how on the basis of such quantity duty of more than Rs. 137 crores could be confirmed against HSG. There is also no answer as to why there is no evidence at all showing grinding of supari during the period prior to 12-8-1999 and subsequent to 26-05-2000. In the absence of grinding of supari how it has not been explained the HSG to manufactured finished goods and allegedly cleared the same without payment of duty. There is no answer to the submissions made on behalf of HSG that no reliance can be placed on reconstructed list of challans and when as per departments own case deleted challans could be retrieved then why the department was relying only on the list of reconstructed challans of GGI.

* As regard the duty demand at production stage, it has been explained by HSG that no reliance can be placed on R documents and detailed explanation is contained in para X on this issue. In respect of 32 loose sheets detailed submissions are contained in para XVIII of the written submissions.

* Similarly in respect of duty demand on clearing stage the detailed submissions are contained in paras IX of the present written submissions. Even in respect of the duty demand at alleged production stage and clearance stage, the revenue is seeking to place reliance only on those portions of inculpatory statements which are in their favour but there is no answer to those portions of the statements which are in favour of HSG or which are wholly contradictory to each other and one another and also directly contradictory to the documentary evidences There is also no answer to the evidence coming on record during cross-examination and how Commissioner could rely upon evidence of these witnesses such as Shri Rajneesh Tiwari who did not offer himself for cross-examination * There is also no answer to various detailed submissions contained hereinabove which was argued at length from para No. V to XXVII In fact, in the written submissions, the respondent was required to give answer to these various submissions made at Bar as these submissions were submitted only on 18-02-13 whereas the undersigned counsel has made the aforestated detailed submissions contained in point No. V to XXVII 31-01-13 to 6-2-13 (excluding 2-2-13 and 3-2-13 being holidays.) .

(iv) THE WRITTEN SUBMISSIONS HANDED OVER BY SHRI N. MEYYAPPAN ON 04-03-2013 * The first submission is only with regard to evidence of procurement of other raw materials in addition to supari. The same is only a repetition of the earlier chart filed vide synopsis dated 3012-12, hence, needs no explanation.

* Another set of submission is described as List of Evidences with respect of All Demands confirmed by the OIO. It is also more or less the repetition of the earlier charts, hence, needs no further submissions.

* The third set of submissions is on various legal issues which are being rebutted hereunder:-.

* In first para the department argued about the admissibility of retrieved documents in terms of Section 36-B. A parallel is sought to be drawn that Section 65-B of the Indian Evidence Act which is pari material to Section 36-B of the Central Excise Act. Reliance has been placed on judgement rendered in the case of Stovekraft v. Jt. Director of Revenue Intelligence, 2007 (214) ELT 179 (Kar) wherein it was held that the data stored on hard drives, pen drives or floppies are in fact electronic records as per Sec. 2(1) (t) and Sec. 65B of the Indian Evidence Act.

* HSG has no quarrel with the proposition that the computer print outs as envisaged in section 36-B of the Central Excise Act are electronic records. It has never been the contention of the HSG that they are goods. Their objection is with regard to its admissibility for which detailed reasons/submissions have been advanced by them. In the first place, the CPUs of HSG and Anju Agency were never sealed. The so-called R documents are reconstructed documents and nowhere it has been specified from which CPU the same were retrieved or reconstructed.

* In para 3 reliance has sought to be placed on the judgement of the Hon,ble Apex Court in the case of State of NCT V Navjot Sandhu (2005) 11 SCC 600 wherein it has been held that call records, which were electronic records could be printed out by a mechanical process and can be adduced as evidence even if all the requirements of Sec. 65-B are not complied with.

* It is the strong contention of the HSG that the law laid down by the Honble Apex Court in the present case of NCT v Navjot Sandhu has absolutely no applicability to the facts of the case. In the first place, this case related only to the call records and not of retrieved or reconstruction of computer print outs. The Honble Apex Court has primarily relied upon evidence as envisaged under Section 63 and 65 of the Evidence Act and not under Section 65-B. It is a common knowledge that there cannot be any doubt about the genuineness and authenticity of the called records and there can also not of any doubt about the print out of such call records which pertain to thousands of submissions. However, the facts of the present case are entirely different which have been explained by HSG in detail in these submissions. Hence, there is no merit in the contention being advanced on the part of the Respondent.

* That, in para 4 of their submissions, it has been contended that in view of the judgement rendered by the Honble Apex Court in the case of Navjot Sandhu the R documents are admissible as evidence which have been independently corroborated by 32 loose production sheets. It is submitted that this submission is devoid of any merit and consideration. In respect of R documents, the department has not even been able to pin point from which CPU the same was retrieved. Even in this para it is their contention that the same was retrieved from the computer of HSG and Patel Brothers. Patel Brothers were only sale selling agent, hence, their cannot be any production record available from their CPU. Moreover, it Revenues own case that this date is not in original form but was only a reconstructed data.

* Further in Section 14 statements everybody had denied any knowledge about the said R documents, hence, this submission is devoid of any merit.

* In para 5 of their submission another highly unsuccessful attempt has been made that in view of above a demand of Rs. 64 crores is sustainable. It means the department has conceded that demand of Rs. 137 crores is not sustainable. HSG has already submitted in details that the duty demand on supari at two stages and on the basis of R documents is wholly unsustainable and non maintainable.

* In para 6 of their written submissions, the reliance has been placed on the provisions of Section 36-A. It has been contended that it is an established fact that the various entities were under the direct control of Mr. Mahesh Singh who was the Managing Director of HSG. Thus any document resumed from the control of Mr. Mahesh Singh can be used as evidence to prove clandestine clearance by the Appellant in light of Sec. 36-A and the facts of this case. Unfortunately no such document has been listed in para 6. It is only contended that documents retrieved from the premises of Mahesh & Co., are admissible hence this submission is devoid of any merit.

* In para 7 of these written submissions reliance has been placed on para 32-37 of the judgment rendered in the case of Navjot Sandhu supra which deals with the retracted confessions. It is not understood as to how the findings rendered by the Apex Court in para 32-37 can advance the case of the Respondent. In the first place, the various inculpatory statements recorded from Mukesh Bajpai, Sh. Amit Srivastava and Rajnish Tiwari are materially contradictory which has been shown in detail by HSG. Further, Sh. Amit Srivastava has resiled from his statement in his cross examination. The Commissioner never doubted the said averments in his cross examination meaning thereby that he was satisfied by his answers. Even in respect of other such as Shri V.N. Pandey and Shri Vinod Verma had also resiled from their statements in their cross examination regarding 32 loose production sheets. In fact, the Department in their written submissions at page 31 and 32 have themselves admitted that these 32 loose sheets were prepared by them i.e. Shri V.N. Pandey and Shri Vinod Verma on 11-10-01 and not before. In fact, there is no independent corroboration of the various inculpatory statements hence the judgment rendered by the Apex Court in the case of Navjot Sandhu does not come to the rescue to the Respondent. Another judgment which has been relied upon by the Respondent is that of Vinod Solanki Vs. UOI reported at 2009 (233) ELT 157 (SC). This judgment is, in fact, in favour of HSG and other parties rather than the Department. In the case of Vinod Solanki, the Apex Court has held in clear terms that burden to proof that any confession was voluntary is on the department. In fact, the appeal of Vinod Solanki was allowed by the Apex Court and this appeal was allowed by relying on the retraction filed by Vinod Solanki.

* In para 8 of their written submissions the department is absolutely wrong by contending that Sh. Mahesh Singh had not retracted from his statement when he was produced before the Magistrate. It appears that such submission has been made even without having any recourse of record. It is submitted that Shri Mahesh Singh was never arrested hence question of his retraction of statement before the Magistrate did not arise. It is also wholly erroneous on the part of the Respondent to contend that the retraction was done after a lapse of long period. In this regard, it is submitted that this is also factually incorrect as first statement of Shri Mahesh Singh was recorded on 25-7-01 and he had retracted from his statement on next day i.e. 26-07-01. The retraction is not being accepted on the ground that the same was not the sole basis for raising the demand. This means the Department has accepted that the retraction was actually received. Further, even if one statement was retracted by Sh. Mahesh Singh the same shows undue pressure exerted by the department which was explained by him in his letter of retraction (page 166/Vol. 1). Further, Sh. Mukesh Bajpai has also sworn an affidavit detailing the same facts. Shri Amit Srivastava in his cross examination had also stated that his various statements were recorded under threat and coercion. The facts of this case clearly show that right from day one the Department exerted undue pressure and coercion to record the inculpatory statements to suit their case. .

* In para 9 the Respondent has relied upon Sec. 9D of the Central Excise Act to contend that due to death of Mukesh Bajpai there cannot be right to cross examination and the non-cross examination of him did not in any way detract the relevance, admissibility or the reliability of his statement and its contents thereof, especially when the same was not retracted prior to his death. It is submitted that even if Sh. Mukesh Bajpai could not be cross examined his statements even otherwise are contradictory. On one hand he stated in his statement dated 06-07-2001 that Mahesh & Co. had diverted 3,06,060.00 Kgs of Supari 2000-01 and a quantity of 1,20,775 Kgs in the year 2001-02. in the year 200-01 to 2001-02 respectively whereas with the same breath he stated that 400 bags were being manufactured daily in the factory of HSG in two shifts. Both these averments are contradictory to each other as it was imposible to manufacture 400 bags on the basis of such insufficient quantity of Supari. The Department has demanded duty of Rs.56,10,75,154/- in the year 2000-01 and Rs.26,07,99,017/- during the year 2001-02 (upto 4-7-2001) whereas even assuming for argument sake durty can be demanded on the basis of single raw material from HSG the same would at best would beto the tune of Rs.3,94,27,700.00 for the financial year 2000-01 and Rs.2,21,83,286.00 totalling Rs.6,16,10,986.00 Further Sh. Rajnish Tiwari in his statement had stated that production was carried out only in one shift in HSG. Similarly, Sh. Mahesh Singh had stated that it was only 3 to 4 times in a month as per the requirement, the factory of HSG used to run for two shifts. Even otherwise there is no finding by the Commissioner on the affidavit to Shri Mukesh Baijai and other contradictions.

* In para 10 of their written submissions, the Department has erroneously placed reliance on the judgement of Jindal Nickel & Alloys v. CCE, Delhi reported at 2012 (279) ELT 134 about the the cross examination of co-noticees. A perusal of the said judgement would reveal that it , clearly holds that there is no bar to cross examination co-noticees. In fact, the matter has been remanded by the CESTAT directing the Commissioner to allow cross examination of all witnesses including co-noticees. In any view, in the present case the Commissioner himself had allowed cross examination of co-noticees, therefore this argument of the department does not hold any water.

In view of the above detailed submissions the appeals of HSG and Mahesh Singh may be allowed.

8. Ld. ASG Shri Mohan Prasaran appearing alonwwith Shri Meyyappan, ld.Advocate filed the following written submissions.

NOTES FOR ARGUMENT

1. Facts Preceding SCN:-

Page No. (OIO) Event 2 Received information

1. Received information about suppressed production

2. 56 invoices/sale bills from informer

3. 18 invoices from trade tax department

4. 70-135 bags were cleared under cover of invoice

5. Invoices destroyed after delivery of goods 3 Search of premises

1. Search was conducted on 04-07-2001 & 05-01-2001

2. Discrepancies in stock register and actual stock of ghutka

3. Materials were issued for manufacture but no corresponding stock found or accounted for

4. Actual stock of supari, kattha and laminated rolls lesser than in the stock register 4 Seizure of vehicles

1. On same day two vehicles enroute to delivery were stopped and inspected

2. Statements of drivers and supervisors recorded

3. They stated that goods were loaded directly from HSG and not Anju agencies

4. Similar discrepancies in stocks and stock register noted in gopal grinding.

5. Many dealers had unaccounted gutkha

6. Computers, floppies, documents, bills, invoices, challans, registers, and 8 more vehicles were seized.

10-07-2001 Mahesh Singh was unavailable to record statement. He filed a writ petition before the Lucknow Bench of the High Court for stay of arrest.

23-07-2001 Mahesh Singh obtained stay of arrest on condition to cooperate with the authorities 25-07-2001 He appeared before the department on the directions of the Court

2. Modus Operandi:-

(i) Operational Setup Sno.

Statement Particulars Details Whether cross examined

1. Ms. Anju Singh, Sister in law of Mahesh Singh, Proprietor of Anju Agencies, vol15. p.5248 Rajnish Tiwari is the manager of Anju Agencies and looks after the day to day affairs. She is not aware of anything else and only signs the papers.

Cross examination was not desired by the Appellant

2. Mr.Om Narain Singh, brother of Mahesh Singh, proprietor or Patel Brothers till 1999, vol15, p. 5251 Mahesh Singh passes on instructions to Rajnish Tiwari who acts in accordance with them.

Cross examination was not desired by the Appellant

3. Mr.Rajnish Tiwari, Manager/computer operator of Anju Agencies, Vol5, p.832 Vehicles that were seized in the raid had left with 140 bags which were loaded in his presence from the premises of HSG directly. Stated that its regular practice to cover the transport with invoices which were subsequently destroyed and edited in the computer records.

Cross examination demanded. The same was allowed as well, however, he did not appear on the ground of being a co-noticee

4. Ms.Anita Singh, Director, HSG, wife of Mahesh Singh, vol.15, p. 5255 Whole affair is looked after by Mahesh Singh and Mukesh Bajpai Cross examination was not desired by the Appellant

5. Ms. Rajni Patel, Sister of Mahesh Singh, proprietor of Gopal Grinding. Vol.15, p.5301 All the employees in Gopal Grinding Industries take instructions from Mahesh Singh.

Cross examination was not desired by the Appellant

6. Mr.Amit Shrivastava, Accountant of HSG, vol3. p.864 Confirmed the statement of Rajnish Tiwari with respect to the modus operandi and stated that in the absence of Mr.Tiwari, he performed the same actions under the instructions of Mahesh Singh.

Cross examination allowed. He appeared and retracted his statement in cross-examination. However since his statement was corroborated by other evidences and specifically accepted by Mahesh Singh, the retraction was held to me meaningless by the OIO.

7. Note Mahesh and Co is owned by Mahesh Singh and it is undisputed that it is under his control alone. Hence all the entities were separate only in name but were under the direct control of Mahesh Singh and acted according to his instructions in practice.

(ii) Procurement stage

(a) Supari Mahesh and Co is a proprietorship firm owned by Mr. Mahesh Singh, who is also the Managing Director in the HSG. Investigations conducted at the premises of Mahesh and Co revealed that the firm trades in red variety of supari which is used in the manufacture of Gutkha. Subsequently, printouts were taken of the cash sale register from the computer of Mahesh and Co. This document, set out at Annexure 65A to 65 D (vol7. pg 2411) shows sales of supari on a cash basis from 01-04-1998 onwards. In many instances, it appeared that huge amounts of cash bills were issued without knowing the identity of the persons as well and advances of huge amounts were recorded in the same. The entire list of the transactions, including the amounts mentioned above have, been extracted in the SCN at Vol.2, p.603-609. On questioning, Mr. Mahesh Singh stated, without questioning the veracity of the cash sale register that these were cash sales made to persons who come and pick up the goods on payment of cash. However, he was unable to provide the details of even a single dealer, their address or contact, although huge amounts have been transacted between him and various parties. In addition, Mr.Anjani Kumar, the computer operator of Mahesh & Co. stated that he usually prepares the bills at the office and hands them over in a bunch to Mr. Mahesh Singh. He had never seen any customer purchasing any of the goods by payment in cash. Further, the statement of Mr. Ashish Kumar Misra, supervisor of Gopal Grinding Industries, states that the godown of Mahesh and Co was in fact a room within the grinding complex at Gopal Grinding and that it was impossible to distinguish the stocks of Mahesh & Co from that of Gopal Grinding Industries. These lead to the inference that in fact the buyers did not exist and that the total quantity of supari allegedly sold on cash basis was in fact diverted to HSG. Thus a demand of 22,43,58,639 has been calculated at Vol.2, pg.562-563 of the SCN, on the final exicisable product which is gutkha, taking into account that the diverted supari would constitute 70% of the final excisable product.

Oral Evidence Statement of Mahesh Singh Ex.19-G, Vol.3, pg.919[981]

1. Was unable to confirm the customer details to whom cash sales of supari were by Mahesh and Co.

2. Many cash sale bills of Mahesh and Co were about Rs.1.Lakh and above (Ex. 66/2 to 66/8, p.28877 to 2883)

3. Many transactions undertaken on credit basis as well for huge amounts

4. Not able to provide the details of even a single customer who bought supari on cash Statement of Ashish Kumar Mishra, Supervisor, Gopal Grinding Ex. 67-A, 67-B(not in paper book)

1. No material from the common godown of Mahesh and Co and Gopal Grinding was supplied to any other third party and all the ground material was sent solely to HSG.

2. The stocks of Mahesh and Co and Gopal Grinding were indistinguishable.

Statement of Anjani Kumar, Computer Operator Ex.68. (not in paper book)

1. Generated all the sale bills as requested by Mahesh Singh and handed them over in a bunch

2. Has never seen a single customer with respect to cash sales and he has never received any payment in cash for any of the cash sale bills issued by him.

Statement of Mukesh Bajpai, Authorised Signatory, HSG Ex.10-C,Vol.3, pg. 778 [790]

1. Supari, including kattha was received without accounting

2. Clandestinely procured material was proportionate to clandestinely sold goods

3. Cash proceeds of clandestinely sold goods used to procure materials clandestinely.

Statement of Mahesh Singh Ex.19-A, Vol.3, pg.896[967], Ex.19-L, Vol.3, pg.939[993]

1. He agrees with the contents of the statement of Mr.Mukesh Bajpai Documentary evidence Printouts of cash sale registers Ex-65-A to 65-D, Vol.7 pg. 2411 to Vol.8, pg. 2876 Cash sale registers of M/s Mahesh and Co. disclosing cash sales to numerous customers from 01-04-1998 till 05-07-2001.

Findings SCN Pages 562 to 566 Since the identity of not even a single customer was disclosed, its logical that all the supari sold on cash basis was in fact diverted to HSG through M/s.Gopal Grinding Industries. The table detailing the year-wise quantity of supari sold and the corresponding duty of Rs.22, 43, 58, 639/- evaded is at pg. Vol.2, pg.562-563 OIO, Pages 203-213

1. That even though there was no legal requirement to maintain any records of the buyers who bought by cash, atleast the details of some of the buyers must have been made available considering the huge amounts and frequent transactions. In the absence of the same an adverse inference has been drawn.(p.205)

2. Non recording of statement of Mr. Anant Kumar Verma, who was apparently the cashier cum godown keeper is not fatal as Mr.Mahesh Singh never mentioned him in his statement and is being projected as a knowledgeable person as an afterthought.(p.208)

3. The statement of Mr.Mukesh Bajpai was not recorded under duress as it could have been retracted at the earliest instance on 07.07.2001 when he was produced before the Judicial Magistrate and he did not. Therefore it is a thoroughly reliable piece of evidence.(p.211)

4. Data stored on the computer was not manipulated as the various panchanamas show that the sealing and re-sealing of the computer has been done in accordance with law.(p.211-212) Note Certain deleted documents containing information regarding cash advances and receipts, to and from various parties were reconstructed by M/s. Stellar and shown to Mr.Mahesh Singh. He admitted the veracity of the same but failed to disclose the identity or details of any of those persons as well. No demand has been made on this ground but it is relevant as corroborative evidence.

(iii) Grinding Stage Gopal Grinding Industries performs job work for HSG by grinding supari, katha and then send the ground material to HSG. As stated earlier there was no way to distinguish between the stocks of Mahesh and Co and Gopal Grinding Industries. Further, it is an admitted fact that GGI does job work only for HSG and that all the ground material is sent completely to HSG. At the time of the raids, the computer of GGI was seized and copies or mirror image of the hard discs were taken by M/s. Stellar for analysis and recovery of deleted data. M/s. Stellar reconstructed documents containing a list of numerous challans of GGI in accordance with which deliveries of several quantities of ground material were made. The recovered document is Ex.93/I at Vol.12., p.4145 , extracted at p.537 of the SCN. The Department then compared this document with the Form IV Register of HSG(Ex.20A-I at Vol.3, p.1113 to 1432) which records the amount of ground supari received by HSG. The discrepancies alongwith multiple use of the same challans were noted and the demand of Rs.18,10,84,268 has been made on this basis for a period between 12-08-99 to 26-05-00. This is further corroborated by the fact of physical recovery of challans of the same number, showing different quantities, which were recovered by the trade tax authorities from the premises of GGI. In this regard, Mr. Ajay Pandey, Computer operator/manager of GGI, admitted in his statement that he prepares the challan in the computer and he was unable to explain as to why 7 copies of a particular challan no.6 resumed from GGI by the Sales Tax Department did not correspond to the two other challan No.6 resumed from HSG (in a previous visit wherein other documents had also been seized). He further states that the same documents shown to him were also shown to Mr. Mahesh Singh on 03-10-01 (Vol.3, p.976) and that he agreed with it. A demand of 1.34 crores approximately which forms part of the above 18 crore, is based on the statement prepared by the Sales Tax Department on the basis of the challans resumed by them.

Oral Evidence Statement of Mahesh Singh dated 06-07-2001 There was no loss of supari at any time by way of rot, pilferage or fire Statement of Ashish Mishra Supervisor, Gopal Grinding Ex. 67-A, 67-B(not in paper book)

1. All the goods are sent exclusively to HSG

2. The stocks of Mahesh and Co and Gopal Grinding are indistinguishable Statement of Rajni Patel, Sister of Mahesh Singh, proprietor of Gopal Grinding. Vol.15, p.5301

1. Only job work is done at GGI

2. He is unaware of the capital, profit or working of the firm.

3. All the day to day work is done by Ajai Pande on instructions of Mahesh Singh and he reports only to Mahesh Singh.

4. All the work relating to the firm is looked after by Mahesh Singh.

Statement of Mr. Ajay Pandey, supervisor of M/s Gopal Grinding Industries, Vol. 15 pg.5281

1. Supervised the operations and prepared challans on the instruction of Mr. Mahesh Singh.

2. Admitted that in a previous visit Sales Tax Department seized other documents from the premises of GGI and Harsinghar.

3. He was unable to explain as to why 4 copies of a particular challan no.6 resumed from GGI by the Sales Tax Department did not correspond to the two other challan No.6 resumed by the Sales Tax Department from HSG.

Documentary Evidence Form IV Register of HSG Ex.20A-I at Vol.3, p.1113 to 1432 This record gives the details of the quantities of ground material that was supplied to them by GGI.

Document as reconstructed by Stellar from computer of GGI, Ex.93/I at Vol.12., p.4145 This reconstructed document, taken from the computer of GGI shows the list of invoices under which various quantities of ground material were supplied to HSG. The difference between the above document and this one, as corroborated by the other statements, forms the basis of this demand.

Findings SCN 537-555

1. Demand was confirmed on the basis of discrepancies between the reconstructed document and Form IV register in addition to smaller demands based on the Statement of the Sales Tax Department.

2. Multiple use of challans and is also noticed and demand on that count is confirmed.

3. Ms.Rajni Singh and others statements indicate that Mr.Mahesh Singh was controlling the affairs of GGI.

4. No explanation from Mr.Mahesh Singh in his statements on 6.5.2001 and 7.5.2001 when confronted with the discrepancies in the above documents and tried to shift the blame by stating that it may be due to clerical or computer errors.(p.555)

5. The evasive and vague explanations by the person managing the entire affairs of all the firms owned by the family show that they are involved in evasion of duty deliberately, knowingly and wilfully.(p.555) OIO 166-178

1. Even though Rajni Patel was the proprietor, Mahesh Singh was actually in control. All these companies are run in the name of different person from the same family.

2. All the ground material was delivered only to HSG and as such was unaccounted.

3. The evidence of GGI can be used against HSG as any independent evidence that corroborates the reconstructed document is admissible and hence the reconstructed documents are reliable.(p. 168)

4. The computer seized from GGI has been sealed and resealed in the presence of a independent witness and the partys representative always and they never objected to or raised any concerns regarding the same throughout the investigations. (p.169)

5. HSG has not disputed that challans were in fact recovered by the sales tax department from the premises of GGI and hence demand on the statement of the Sales Tax Department confirmed as the resumed documents are a genuine piece of evidence.(p.173)

6. Demands confirmed on the basis of similar reasoning as stated in SCN.

(iv) Production Stage After the material is ground as stated above, all of it is sent to HSG for the manufacture and packaging of pan masala. During the raid CPUs were sized from the premises of HSG and Anju Agencies. M/s.Stellar took mirror images of the hard disks of the same CPUs under panchnama and reconstructed various deleted documents. The documents reconstructed by M/s.Stellar has been broadly classified into R-docs (R-4 to R-444) and ST or F documents. These documents showed the daily production, stock and dispatch of goods. Hence the same were compared with the RG-I register of HSG. The department then prepared a chart based on the discrepancies in the above two documents for a period between 1-02-99 to 03-07-2001, on actual basis which are at Annexe XIII-A and XIII-B (vol.18, p.116-123). A demand of approximately Rs. 25 crore is has been made on the basis of these charts. The fact of clandestine manufacture and the authenticity of the R-documents has been corroborated by 32 loose sheets (Vol.5, p. 1942) recovered from the premises of HSG which appear to be daily production sheets. These were part of a folder containing 132 papers which were resumed as serial no.188 of Annex-C to panchnama dated 04-07-2001 from the premises of HSG and contains the signature of Mr.Mukesh Bajpai authenticating the veracity of the same. Out of these 132 papers, 32 were found to be sheets containing the details of shiftwise production for the period from 16-05-2001 to 31-05-2001. These tallied with the production records for the corresponding period of 16-05-2001 to 31-05-2001, as stated in the reconstructed documents. The comparison between the two is at P.535, vol.2 of the SCN. Further, these sheets were shown to the employees of HSG, Mr. V.N.Pandey and Vinod Verma who stated in their statements dated 11-10-2001, that these 32 sheets were prepared by them. They stated that they were given the loose sheets in the morning by the guard and that they made note of the attendance of the labourers, the shift timings and the number of bags manufactured. This was later handed over to the guard after the completion of the shift. Subsequently, the 32 loose sheets were shown to Mahesh Singh as well on 11-10-2001 alongwith the statements of his employees as mentioned above and Mahesh Singh confirm the truth of the same.

The ST/Fa documents, which were also reconstructed, contained both edited and unedited documents pertaining to clearances of Harsinghar Gutkha. The difference between the actual clearances effected and those less recorded as per the edited and unedited documents were tabled at Vol.2, p.522 of the SCN, and has been used to make a demand of Rs.5 crore approximately.

Oral Evidence Statement of Mr. V.N.Pandey , employee of HSG Ex.44, Vol.16, p.2099 That these 32 sheets were prepared by them.

They stated that they were given the loose sheets in the morning by the guard and that they made note of the attendance of the labourers, the shift timings and the number of bags manufactured.

This was later handed over to the guard after the completion of the shift Statement of Vinod Verma, employee of HSG, Ex. 43, Vol.16, p.2094 That these 32 sheets were prepared by them.

They stated that they were given the loose sheets in the morning by the guard and that they made note of the attendance of the labourers, the shift timings and the number of bags manufactured.

This was later handed over to the guard after the completion of the shift Statement of Mahesh Singh, dated 11-10-2001, Ex-19- F, vol. 3, p.977-978, and statement dated 13-06-2001, Ex.190, Vol.3, p.960-965.

The 32 loose sheets were shown to Mahesh Singh as well on 11-10-2001 alongwith the statements of his employees as mentioned above and Mahesh Singh confirm the truth of the same Documentary Evidence R-documents, reconstructed by M/s.Stellar Vol.9- Vol.12, upto p.4097 Deleted documents, reconstructed by M/s.Stellar, that showed the daily production, stock and dispatch of goods for the period between1-02-99 to 03-07-2001.

Panchnama dated 04-07-2001 Ex-1,Vol2, p.666 The Panchnama under which the folder containing 132 loose sheet was seized.

RG-I register of HSG Ex-20, Vol-3,p.1004 to Vol.4, p.1112 The production register maintained by HSG ST/F documents reconstructed by M/s.Stellar Ex.89/1 p.4105 Reconstructed documents contained both edited and unedited versions of the same document pertaining to clearances of HSG. The difference between the actual clearances effected and those less recorded as per the edited and unedited documents was the basis for a demand of approximately 5 crores.

32 loose productions sheets recovered from premises of HSG Vol.5, p. 1942 These were part of a folder containing 132 papers which were resumed as serial no.188 of Annex-C to panchnama dated 04-07-2001 from the premises of HSG and contains the signature of Mr.Mukesh Bajpai authenticating the veracity of the same Findings SCN p.512 -537 On being shown the documents mentioned above, Mahesh Singh had no satisfactory answer to explain the discrepancies. (p.536) The same details were found to be present some of the reconstructed documents and the invoices provided by the trade tax department/the informer. This has been tabled at p.535, thus corroborating the veracity of the same.

Further, in the hard copies of the corresponding invoices as shown in the table reflect that only 1or 2 bags were cleared. Thus, it is clear that the quantities were reduced after delivery and that the R-documents are accurate and reliable.(p.535) OIO 141-166 Mahesh Singh stated that the 32 loose production sheets were prepared by his supervisors and that he has seen the same and signed them.(p.146) The argument that the R-documents are fabricated is negatived as the R-documents pertain only to 118 days and nothing prevented the department from fabricating for the entire period.(p.148) The 32 loose production sheets and R-documents are two independent set of documents and the fact that some of them correspond establishes their genuiness.(p.148) The contention that the two signatures of the employees were obtained on the same date as their statement was not accepted on the ground that infact their statements dated 11.10.01 was shown on the same day to Mahesh Singh who agreed with the statement of the two supervisors. Further, Mukesh Bajpais signature on the 32 loose sheets confirms the fact that they were resumed on 04-07-2001 with signatures.(p.152)

(v) Clearing Stage This part of the demand is based on the clandestine clearance of goods from the premises of HSG/Anju Agencies. There are 72 invoices which are Xeroxed hard copies of the original sale invoices before destruction or editing of the same, handed over by the informer and the sales tax department.(56-informer, 18-Sales Tax Department). The computer of Patel Brothers/Anju Agencies were seized and printouts of their stock register (Ex.35-A to E, vol.5, p.1782) was taken in the presence of Mr.Rajnish Tiwari. On the basis of the statements of various employees and on the usage of the vehicles and fuel bills, it is the case of the department that on average a consignment of 70 bags was transported and never was it 1,2,3,4 or 5 bags as recorded in the stock register. Thus, on analysing the stock register, only the entries wherein 1,2,3,4 or 5 bags were shown to have been transported, it was counted to be 70 and even wherever the records showed that 6 or more bags have been transported, no demand has been made on those entries. Only 4557 entries/invoices were found to have the values from 1,2,3,4, or 5 and hence these have been taken to be 70 and then duty has been calculated on the same. A chart has been prepared at annexure VIII-A to D at Vol.18, p.23-81 detailing the 4557 invoices which have been taken to be 70.

Oral Evidences Statement of Rajnish Tiwari Manager, Anju Agencies Exa-11A-II, 11-B, 11-C, Vol.3, p. 812. [814-815]

1. K.N.Singh instructs which dealer gets how much gutkha

2. Goods are loaded from HSG

3. Invoices are prepared at Anju agencies by him for the whole quantity

4. These are destroyed after delivery

5. Details of the original delivery are given in a slip to Mr.K.N.Singh

6. Where bills are countersigned by the customer, the original is kept intact

7. Later instead of deleting the invoice in the computer they edited the value alone.

8. In his absence Mr. Amit Shrivastava did the same

9. Such practice was known to Mr.Mahesh Singh and Mr.Mukesh Bajpai.

10. The chart prepared in annexure VIII A- D has been certified by him to be true and correct.

Statement of Amit Shrivastava, Employee, HSG Ex.12-A, Vol.2.p.868.

1. Looks after the accounts of HSG

2. Is aware of the modus operandi

3. Gutkha is loaded from HSG and not from Anju Agencies

4. Sale bills are generated by Mr.Rajnish Tiwari

5. He generates bills when Rajnish Tiwari is absent on instructions of K.N.Singh or Mahesh Singh

6. Daily production is around 400 bags(corroborated by 32 loose sheets) Statement of Mukesh Bajpai, Manager and Authorised Signatory,HSG Ex.10-B, 10-C,Vol.3, p.776-790.

1. Entire production of HSG is sold to Anju agencies

2. Anju agencies is located 100 metres from HSG

3. factory is run in two shifts and daily production is 400 bags.

4. Only 75 accounted for.

5. Payment for unaccounted raw materials made from cash from unaccounted sales of gutkha

6. Normally 70 bags in a vehicles are reduced to show only 1,2,3,4 or 5 in the records Statement of Anju Singh, proprietor Anju Agencies Ex.130, vol-15, p.5248 onwards.

1. Anju agencies does not sell any other goods

2. Day to day work is handled by Rajnish Tiwari

3. Rajnish Tiwari acts on the instructions of Mahesh Singh Statement of Rajesh Kumar Nigam, sales supervisor Ex.9-B, Vol.3,p.761

1. Vehicles are fully loaded with 70 bags and not with 1,2,3,4 or 5 bags.

2. similar statement by Kapil Saxena, Sales Supervisor, Ex.8B, Vol.2, p.749 Statement of Ram Chander, driver, Ex.133D, Vol.15, p.5245.

1. He has worked for two and half years

2. No log book is maintained

3. Goods loaded from HSG

4. Never 1,2,3,4 or 5 bags. Always 70

5. Similar statements by three other drivers Sanjeev Yadav, Ex.133A, Vol.15, p.5241, Girish Dubey, Ex.133C, Vol.15, p.5244 and Omprakash Nigam, Ex.133B, Vol.15, p. 5242.

Statement of Kamal Kumar Jain, dealer Ex.27-B, Vol.5, 1604.

1. In statement date 26-11-01, admitted to receiving 20 bags vide invoice no. 1269 dt. 24-11-99.

2. Corresponding altered invoices show only sale of 1 and 2 bags

3. In subsequent statement, he has denied receiving the consignments.

Statement of Mr. Sarvesh Bajpai, owner of M/s SSR filling station Ex 42 Vol 6, pg. 2088 That the Appellants operated accounts in the name of Gopal Singh and Govind Singh and payments were settled in cash.

Statement of Mr. Rajnish Tiwari. Ex- 11 F Vol 3, pg. 845 He admitted that the diesel purchased was used for transportation of pan masala gutkha.

Documentary Evidence 72 xeroxed hard copies of the original sale invoices, Ex.35-A to E, vol.5, p.1782 Xeroxed hard copies of the original sale invoices before destruction or editing of the same, handed over by the informer and the sales tax department.(56-informer, 18-Sales Tax Department) Vehicle running account, Vol 6, p.1974 Cash memos pertaining to refuelling of the vehicles while delivering goods were found in the premises of HSG as part of their vehicle running account. Some of the memos mention the vehicle numbers, which match with the 72 invoices given by the informer and the trade tax department. It was observed that the delivery invoices for the said dates indicated that only 2 or 3 bags were delivered to places about 100 kms from lucknow(hardoi). It is unusual for a truck with a capacity of 70 -140 bags to go outstation and deliver only 2 or 3 bags. In fact the invoices given by the informer for the corresponding deliveries indicate that 40 and 90 bags were delivered. (p.503 of SCN) Findings SCN p.484-486 Out of a total of 11 vehicles only one of the vehicles owned by the appellants had a capacity to carry only 30 bags while the rest had a capacity to carry 70 bags therefore leading to the logical conclusion that on a frequent basis it is highly improbable that the appellant used these vehicles to transport the purported 1-5 bags over large distances as corroborated by various evidences tabled above.

OIO p.117 -133 It appears unusual and naive to think that the vehicle would travel so far to deliver only 1 or 2 bags. Also the OIO observes at 118 that the average of the total bags calculated on the basis of the 72 invoices recovered from the informer amounts to around 70 per invoice.

SUBMISSIONS ON LEGAL ISSUES ON BEHALF OF THE RESPONDENT

1. Admissibility of retrieved documents and computer printouts: It is humbly submitted that the retrieved documents and direct printouts are admissible and authentic records of the clandestine clearances effected by the appellant herein. It is submitted that reliance is primarily placed on Sec.65-B of the Indian Evidence Act. It is pertinent here to point out that Sec.65-B of the Indian Evidence Act and Sec.36-B of the Central Excise Act, are pari materia and lay down the same guidelines. However, Sec.65-B deals with admissibility of electronic records, while Sec.36-B pertains to computer printouts, facsimile etc. Therefore it is submitted that Sec.65-B would be applicable in this case and in any event, since the principles underlying both Sec.65-B and Sec.36-B are the same, the law laid down in the aforementioned case would be applicable in the present facts and circumstances.

2. It has been held in Stovekraft v. Jt.Director of Revenue Intelligence, 2007 (214) ELT 179 (Kar) that the data stored on hard drives, pen drives or floppies are in fact electronic records as per Sec.2(1) (t) and Sec. 65 B of the Indian Evidence Act.

3. Sec.65-B of the Indian Evidence Act was interpreted by the Honble Supreme Court in the case of State of NCT v. Navjot Sandhu,(2005) 11 SCC 600, wherein it was held at para 150 & 151 at p. 114-115 of the compilation, that call records, which were electronic records could be printed out by a mechanical process and can be adduced as evidence even if all the requirements of Sec.65-B are not complied with. These will be admissible as evidence under Sec.63 and 65 and mere non compliance with all the conditions of Sec.65-B shall not debar their admissibility under other sections of the Evidence Act. The Court was also pleased to hold that, as regards the allegation that these records were fabricated, to prove the authenticity of the printouts/electronic records, it is sufficient that the person who is fairly familiar with the computer system and its output, certifies the same to be correct.

4. Therefore, in light of the same, it is humbly submitted that in the present case, with respect to the retrieved R-documents, which were retrieved from the computers of HSG and Patel Brothers, on the basis of which approximately 30 crores has been demanded at the production stage are admissible as evidence and has been independently corroborated by 32 loose production sheets(whose authenticity has been established by the statements of the employees who prepared them namely, V.N.Pandey and Vinod Verma. This has been further certified to be true by Mukesh Bajpai.) Further, as Mr.Mahesh Singh could not give any plausible explanation an adverse inference must be drawn.

5. Further, in respect of the direct printouts taken from the computers of Anju Agencies, in the presence of the computer operator Mr.Rajnish Tiwari, and certified by him to be authentic and true, a demand of 64 crores has been raised. It is submitted that in light of the decision cited above, as the computer operator as certified the authenticity of the records showing unaccounted clearances at the clearance stage, the same are admissible and authentic and the demand of atleast 64 crores must be sustained even if the supply of supari worth 25 crores, 18 crores worth of ground material and 30 crores at the production stage are considered to be corroborative evidence as finally the total clearances effected have been to a tune of rs.64 crores. It is submitted that this is also corroborated by the evidence in the other demands as well.

6. Admissibility of Documents retrieved from the premises of various parties against another part: It has been the contention of the appellant that the documents resumed from the premises of Mahesh and Co, gopal grinding and Anju Agencies etc cannot be used against HSG and that only the documents resumed from the premises of HSG can be used as evidence against the main appellant. In this regard it is submitted that Sec.36-A of the Central Excise Act, states that the document which has been seized from the premises or from the control of a particular person, then the same may be used against them. It is submitted that in light of the various unretracted and corroborated statements made by the family members and other employees of the aforementioned organizations, it is an established fact that the various entities were under the direct control of Mr.Mahesh Singh who was the Managing Director of HSG. Thus any document resumed from the control of Mr.Mahesh Singh can be used as evidence to prove clandestine clearances by the Appellant in light of Sec.36-A and the facts of this case.

7. Admissibility and Evidentiary Value of Retracted Confessions: In the case of State of NCT v. Navjot Sandhu,(2005) 11 SCC 600, at para 32-37, which was a criminal case, wherein the standard of proof is beyond doubt, it has been held that retracted confessions are admissible and that a mere retraction would not render the same inadmissible. Further, it must be borne in mind that if the retraction appears to be an afterthought, then the same must be relied upon. Even if the statement is retracted, then to place reliance upon it, the same must be corroborated and corroboration does not mean corroboration or each and every circumstance mentioned must separately and independently corroborated. It would be sufficient if the general trend of the statement is corroborated or substantiated by other independent evidence/evidences. These principles have been substantially reiterated in the case of Vinod Solanki v. UOI, 2009(233) ELT 157 (SC).

8. Thus, it is submitted in the present case, most of the statements have not been retracted and with respect to the alleged retraction by Mr.Mahesh Singh, the same was not done at the earliest moment possible, which is when he was produced before the magistrate and was purportedly done by a registered post which was not received by the respondent herein. Even assuming the same retraction was sent, it was done after a lapse of a long period and only with respect to one of his statements and thus it is submitted that the same was retracted as an after thought. Further, since the retracted statement or the other statements are not the sole basis for raising the demand and as the contents of the statement are corroborated by the numerous other evidences, the contents of the statements must be considered to be true and authentic.

9. Right to Cross-Examination of Mr.Mukesh Bajpai and the relevancy of his statement: It is submitted that as per the provisions of Sec. 9D of the Central Excise Act, there are certain prescribed circumstances wherein the cross-examination can be legitimately denied , one of them being that the person giving the statement had died. The validity of this section has also been upheld by the Honble High Court of Delhi in the case of J & K Cigarettes v. CCE, 2009 (242) ELT 189 (Del). at para 24-25. Thus, in the present case as MR.Mukesh Bajpai had passed away, there can be no right to cross examination and the non-cross-examination of him does not in any way detract the relevance, admissibility or the reliability of his statement and its contents thereof, especially when the same was not retracted prior to his death.

10. Right to Cross-Examine Co-noticee, admissibility and reliability of the same: It has been held in Jindal Nickel & Alloys v. CCE Delhi, 2012(279) ELT 134(Tri-Del) at para 9, placing reliance upon the Supreme Court decision of Kanungo & Co v. Collector of Customs Calcutta, 1983 (13) ELT 1486 (SC) that a co-noticee has a right to refuse cross-examination and that no person can be made to state self incriminating statements as they are protected under Art.20(3). Therefore, cross-examination of co-noticees cannot be insisted upon as a right and can be permitted only if the co-noticee consents to the same. Non- cross examination will not detract from the authenticity or the admissibility of such statements as long as they are corroborated by other independent evidence and corroboration does not mean corroboration or each and every circumstance mentioned must separately and independently corroborated. It would be sufficient if the general trend of the statement is corroborated or substantiated by other independent evidence/evidences.

9. We have gone through the impugned order and considered and appreciated submissions made by both sides.

10. The Commisoiner vide his impugned order has adjudicated 3 show cause notices. We shall deal with all the 3 show cause notices separately. Inasmuch as major demand of amount of Rs.1,37,63,64,467/- crore is under show cause notice dated 31.1.2003, we shall first deal with the said show cause notice. As the said show cause notice raised demands of duty on various counts and different evidences, the same shall be dealt in respect of separate quantums of duty.

1.Show Cause Notice dated 31.1.2003

11. It is seen that the demand stands raised under the said show cuase notice based upon the various evidences of sale of supari by M/s.Mahesh & Co. and crushing and grinding of the same by M/s.Gopal Griding Industries as also based upon the documents received from the informer and trade tax department as also based upon reconstructred documents retrived from the computers of various appellants. The appellants have raised common grounds assailing the impugned order on violation of priciples of natural justice, confirmation of demand of duty based upon the statements of various persons, who were not offered for cross examination, confirmation of demand based upon procurement of only one of the raw material without there being any evidence of procurement of other raw material and mainly on the gorund that it is the same supari which stands procured from M/s.Mahesh & Co. which is further sent to Gopal Grinding Industries, which is actually received by HSG and further used for pan masala and gutkha sold in the market. As such, it stands contended before us that the demand of duty based upon only one set of evidence, at various levels is neither justified nor warranted. As such, it stands strongly constested before us that multiple levels taxation by the Revenue is not justified. Ld. ASG appearing for the Revenue has fairly agreed that the Commissioner has confirmed the demand on multiple levels taxation i.e. in respect of same supari which has travelled from Mahesh & Co has passed thorugh various other stages like grinding and crushing in the hands of Gopal Grinding Industries, which stands used by HSG for manfucature of final products and confirmation of demand on multiple point taxation is not justified. We shall revert back to the said issue after dealing with individual demands.

Demand of duty of Rs.22,43,58,638/-

12. The said demand is based upon scrutiny of records of Mahesh and Co., which is in respect of uncut supari. It is seen that Mahesh & Co. has sold supari to HSG as also to other buyers against cash receipts. From the records of Mahesh & Co., it was found that invoices showing cash sale of supari to various customers had not mentioned the address of the customers neither has given any other particular or details so as to identify the customers. The adjudicating authority has held that the said cash sale by Mahesh & Co. were, in fact, to HSG inasmuch as Mahesh & Co. is dealing in red variety of supari which is only used in the manufacture of pan masala. Further as the said trading unit has not given the name of buyers against cash sale and even during the course of adjudication could not explain the identity of such buyers, it has to be concluded that such cash transactions were with HSG only. The appellants have assailed the above finding of the Commissioiner on the ground that the same are in the nature of surmises and conjectures. There is vertually no evidence to reflect upon the fact that such cash sales were only to HSG. No evidence of transporation of such supari or receipt or use of the same in the appellants facatory has been produced on records. No document was recovered from HSG showing any receipt of excess supari from Mahesh & Co. As such, entire findings are based on assumption and presumption. They have further submitted that in any case, the statement of Shri Mukesh Bajpai revealed receipt of particular quantity of supari in cash and based upon that the demand would not be more than Rs.6.16 crores.

Against the above, Revenue have strongly contended that inasmuch as cash sale register of Mahesh & co., disclosing cash sale to numerous customers did not reveal identity of even single custosmer, it has to be held such cash sale were made to HSG. Same stand admitted by Mahesh Singh as also Mukesh Bajpai in their written statements recorded during investigation.

As regards the said demand of duty, we find that admittedly Mahesh & Co. is a trading company under proprietariship of Shri Mahesh Singh, who is also the director of HSG. M/s.Mahesh & Co.is procuring supari from various traders and manufacturers and is supplying the same to HSG. The record which stands resumed during the course of raid at their factory revealed that such supari was also being sold in cash to other customers. Such cash bills are retrieved from the computers of M/s.Mahesh & Co. which were sealed at the time of seizure. Even the said appellants have also not disputed the issuance of cash bills but they have submitted that they are genuine bills for sale to independent buyers. It is seen from the said documents retrieved from the hard disk of their seized CPU that these independent customers have been allotted specific account codes against their names and huge amount of money has been shown as having been received by them against cash sales of supari. Apart from the fact that law does not permit cash sales of huge amounts, we also note neither any representative of Mahesh & Co. nor of M/s.HSG or Shri Mahesh Singh was able to decode the codes and give full address of any of the customers. Event the address of the persons who have been shown to have deposited huge amount of advances could not be disclosed. No receipts of such advances were produced. No body has been able to explain as to how a particular customer is identified by the account no. without there being any address. This fact, readwith the statements of various persons leads to the inevitable concluson that supari was being sold to HSG who were making cash payments to M/s.Mahesh & Co. which were beng reflected in their records under some different fictitious names.

Further, it is proved on record that red supari in which Mahesh & Co. was dealing is exculsively used in the manufacture of pan masala. This fact stands admitted by Mahesh Singh in his statement recorded during the investigation. M/s.Mahesh & Co. is selling small quantities of supari to independent buyers against cash receipt. But red supari can only be used in the manufacture of pan masala. It leads, without any doubt, to one factual fact that only manufacturer of pan masala can use such supari. If that be so, manufacturer of pan masala would not be requiring such small quantity of supari as shown to have been sold by Mahesh & Co. in their invoices. Further, it is quite strange that though Mahesh & Co. had shown the sale of Supari to various independent buyers, they have not mentioned the address of any buyer on any of invoices so raised by them. Even during the course of investigaton, they could not explain or disclose the identity of even one buyer. The above conduct of M/s.Mahesh & Co. especially when Mahesh Singh was common factor between trading unit and pan masala manufacturing unit leads to strong doubt about diversion of supari to HSG under the cover of cash sale to independent buyers. Such doubt gets converted into evidences by the statement dated 05.07.2001 of Shri Mukesh Bajpai who is authorized signatory of HSG admitting receipt of the supari from Mahesh & Co., payments for which were made in cash from the proceeds of unaccounted clandestinely removed pan masala. He also stated that the raw material received without accountal from Mahesh & Co. was proportionate to the unaccounted pan masala manufactured and cleared by HSG. Though, we note that said statement was not agreed upon by Shri Mahesh Singh in clear terms but this fact would not be fatal to the Revenues case inasmuch there is sufficient material duly corroborated by other evidences.

Further one Shri Anjani Kumar, computer operator of Mahesh & Co. in his statement dated 26.11.2001 deposed that sale bills/cash bill were prepared by him and he never ever met any customer nor received any cash. He further stated that bills were prepared according to his convenience and were handed over in bunch to Shri Mahesh Singh. During his cross examination on 8.9.2004, he stated that Shri Mahesh Singh used to give him a list of various persons for preparation of computer cash bills. The said list appeared to be in the handwriting of Shri Anant Kumar Verma, godown keeper cum cashier of the godown of Mahesh & Co. situated about 2 km away from the office. This fact itself reflects that Mahesh & Co. only generated cash sale bills without any actual sale of supari to independent customers. The appellants contention that no adverse conclusion can be drawn against HSG on the transacations of a third party i.e. Mahesh & Co. does not appeal to us inasmuch as Mahesh & Co. cannot be said to be a third party in strict sense. Admitedly Mahesh & Co. is under the propertariship of Shri Mahesh Singh, who was director of HSG. Further, we note that supari sold by Mahesh & Co. was being crushed by Gopal Grindng Industries who was admittedly sending the entire quantiy of crushed suapri to HSG. The computer records of M/s.Gopal Grinding Industries also reflect upon excess supari having been crushed other than the quantity reflected in the records of M/s.HSG. Admittedly M/s.Gopal Grinding Industries was doing exclusively 100% job work of M/s.HSG. This fact lends corroboraton to the excess diversion of supari by Mahesh & Co. to HSG.

The above fact becomes clear from the statement of Shri Ashish Kumar Misra, employee of Gopal Grinding Industries. There are evidences of excess grinding of supari by Gopal Grinding Indstries with which we shall deal in due course. If Gopal Grinding Indstries was grinding and crushing excess supari and sending the same to HSG it has to be held that such excess supari was crushed by Gopal Grinding Indstries which was received from Mahesh & Co.

13. At this stage, we may deal with appellants arguments that apart from evidences of procurement of supari, there is no evidence on record as regard procurement of other raw materials. They have contended that manufacture of pan masala and gutkha requires various raw materials which are as under:-

                                      GUTKHA                                       SADA PAN MASALA



Supari

Kattha

Tobacco

Cardamom

Lime

Menthol

Perfume

                Total:
70%

14%

10%

2.50%

2%

1%

0.50%

100%
Supari

Kattha

Cardamom

Lime

Menthol

Perfume

                Total:
80%

14%

2.5%

2%

1%

0.50%

_____

100%

It stands contended that Revenue has only alleged receipt and non accountal of supari and there is no allegation against receipt and non accountal of other raw materials i.e. katha, cardmom, tobacco, etc. As such, they have contended that confirmation of huge demand of Rs.22.43 crores based upon alleged receipt of supari is not justified. For the above proposition, they have relied upon various decisions of the Tribunal laying down that in the absence of evidence showing procurement of various raw materials, finding of clandestine manufacture and clearance cannot be upheld.

In the case of Har Singar Gutkha Pvt.Ltd. vs. CCE, Lucknow-2005 (186) ELT 369 (Tri.-Del.) relied upon by the appellant, it was observed that shortage of one of the raw materials, cannot lead to confirmation of demand of duty on the final products. We find that in the said case, the shortage of supari detected by the visiting officers was explained by the appellant which was being sent to another firm for job work and shortage of katha, tobacco, cardamom etc. which the Tribunal found was on account of natural waste during manufacture of pan masala cannot be held to be sufficient evidence for upholding finding of clandestine removal. The decision in the said case is not applicable to the facts of the present case. Inasmuch as we have already arrived at a finding that the appellant M/s.HSG was procuring huge supari from Mahesh & Co. M/s.HSG has not explained as to how suge huge quantity of supari stands used by them. Admittedly, supari is one of the major raw materials for the manufacture of pan masala as is evident from the above chart produced on records. The same is required to the extent 70% to 80% and quantum of other raw mateials required for manufacture of pan masala are on a much lower side. Though, Revenue has referred to some of the evidences of clandestinely procured katha and other raw materials, which might be lower in quantity than the requisite quantity for manufacture of Pan Masala, but we find that the said fact by itself is not sufficient to ignore the receipt of supari by HSG and its utilization in the manufacture of final products.

Similarly, we note other decisions relied upon by the appellants like CCE, Indore vs. G.M.Products-2007 (207) ELT 723 (Tri.-Del.); CCE, Pune-II vs. Venkaateshware Pan Masala-2007 (209) ELT 255 (Tri.-Mum); Sanket Food Products Pvt.Ltd. vs. CCE, Aurangabad-2005 (188) ELT 107 (Tri.-Del.); Jagatpal Prem Chand Ltd. vs. CCE, Delhi-I-2004 (178) ELT 792 (Tri.-Del); and other various decisions, are not applicable to the facts of the present case. It may not be out of place to mention that allegations of clandestine manufacture in each and every case is solely to be decided on the basis of evidence available in that particular case and it is only the broad guideline laid down by various decisions of the judicial and quasi judicial authority which are required to be followed. No doubt onus to prove clandestine removal lies heavily upon the Revenue and is required to be discharged by production of positive and tangile evidence. However, such discharge of onus by the Revenue cannot be expected upto the last decimal point. Each case requires appreciation of evidence procured by the Revenue. Having held that supari cleared by Mahesh & Co. aginst cash bill to independent buyers was, in fact, cleared to the manufacturer HSG, failure on the part of Revenue to show procurement of other raw materials sufficient for the manufacture of such huge quantum of pan masala and gutkha, would not act prejudiced to the Revenues interest. Admitedly, such earthing of evidence in respect of other small quantum of raw materials, may not be possible or practicable in a given case. Inasmuch as receipt of the major raw material, which is almost to the extent of 70% to 80% stands established alongwith showing procurment of other raw material in smaller quantity, leading to the inevitable conclusion of clandestine manufacture of pan masala and clearance of the same by HSG. We would like to observe that receipt of supari by HSG which does not stand accounted for in their statutory records is not solely based upon ledger of M/s.Mahesh & Co. As aready discussed, the same is fully corroborated by various statements, including statement of Mahesh Singh who is at helm of affairs of both appellants i.e. trading unit M/s.Mahesh & Co. and manufacturing unit M/s.HSG.

We may, here, also deal with the appellants contention that the procedure to retrieve documents from the seized CPU was not proper. It stands dealt in para 45.18 and 45.19 of the impugned order that the CPU was properly sealed at the time of seizure and whenever, sealed, it may always be done in the presence of appellants representative and under a panchnama. A detailed chart showing opening of CPU, panchnama drawn and the presence of the appellants representative stands reproduced by Commissoner. As such, we do not find any merit in the above objection of the ld.Advocate.

In view of foregoing discussion, we are of the view that Mahesh & Co. was diverting supari to HSG and all cash bills raised by them are in fact in respect of supari so diverted. As such, the duty confirmed on the said count is justified.

However, ld.Advocate has submitted while confirming the demand of duty on the said count, Revenue has not considered the wastage of 10% which invariably arises during the process of grinding and if such wastage is allowed to them, demand of duty gets reduced to Rs.19,51,22,505/-. We agree with the above contentioin of the ld.Advocate. Admitedly the entire quantity of supari cannot be converted into final product, without there being any wastage. At this stage, we note that such wasge stands allowed to the appellant by the Tribunal in their own case reported as Har Singar Gutkha Pvt.Ltd. vs. CCE, Lucknow-2005 (186) ELT 369 (Tri.-Del.) For the said purpose, we remand the matter to the Commissionier to calculate the duty amount after allowing wastage as prescribed under the law. As the matter is being remanded for duty requantification, the adjudicating authority would redecide the quantum of penalty accordingly.

Demand of duty of Rs.18,10,84,268/-

14. It is seen that Gopal Grinding Industries was the job worker of M/s.HSG, who was cutting the supari and crushing other raw materials and sending the same to HSG. Major part of the said demand stands confirmed based on challans of Gopal Grinding Industries reconstructed from deleted/destroyed data of hard disc of its CPU. The mirror image of the hard disc of this CPU was taken. Both sides have advanced their arguments on the admissibility of evidences of such nature. However, we do not propose to deal with the evidenciary value of retrived/reconstructed data on the short ground that it was the same supari which was received by Gopal Grinding Indusries from Mahesh & Co. which stands crushed by them and further sent to HSG. As such confirmation of demand for the second time, in respect of supari received from Mahesh & Co. with which we have already dealt with and confirmed the demand is neither justified nor warranted. Ld.ASG appearing for the Revenue fairly agrees with such separate demand of duty on the crushed supari in the hands of Gopal Grinding Industries is not called for. We accordingly set aside the confirmation of demand on this short ground itself.

Demand of duty of Rs.63,97,85,850/-

15. The above demand has been confirmed by the adjudicating authority can be divided into two parts. An amount of Rs.85.77 lakhs is confirmed on the basis of 72 invoices out of 74 invoices provided by the informer and trade tax department. Such invoices received by the Revenue were photocopies of the invoices ad no details as to who was the informer and how the trade tax department handed over the invoices to the Revenue are available on records. There is no panchnama drawn in respect of the receipt of same. As rightly argued by ld.Advocate the presumption as regads correctness of the said documents in terms of section 36A of Central Excise Act, 1944 cannot be arrived at inasmuch as the said documents were not recovered from the appellants factory or their custody or control. Without going into the question of genuineness or otherwise of the said documents, which are only photocopies, we are of the view that reliance on the same is not in accordance with law inasmuch as even origin of the said documents does not stand disclosed by the Revenue. Reliance placed by the Appellant on the decision fo the Honble Supreme Court in the case Tukaram S.Dighole Vs.Manikrao Shivaji Kokate-2010 4 SCC 329 and also Ashwin S.Mehta Vs.CC, Mumbai-2006 (197) ELT 386 (Tri.-Mum.) is appropriate. For better appreciation, we reproduce section 36A of the Central Excise Act, 1944:

36A. Presumption as to documents in certain cases.- Where any document is produced by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law and such document is tendered by the prosecution in evidence against him or against him and any other person who is tried jointly with him, the Court shall,

(a) unless the contrary is proved by such person, presume

(i) the truth of the contents of such document;

(ii) that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the Court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that person's handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested;

(b) admit the document in evidence, notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence. As is seen from the above section, presumption of truthfull contents of documents is in respect of only those documents which are either produced by person or has been seized from the custody or control of any person. In the present case 72 invoices relied upon by Revenue, have neither been seized from the factory of the appellants nor recovered from the control of any employee of the appellants. As is evident the said invoices stand procured by the Revenue from the informer, whose identity does not stand disclosed by the Revenue or from tax department in respect of which there are no panchnama proceedings. As such, we are of the view that onus to prove the authentic nature of said invoices and produce evidence to show that the said invoices stand issued by the assessee covering clandestine transaction lies very heavily upon the Revenue and is required to be discharged by producing sufficient, affirmative and tangible evidence, which they have failed to do so. As such, we agree with ld.Advocate that confirmation of demand based upon the said 72 invoices cannot be upheld.

We also note that an identical issue of confirmation of demand based upon the receipt of invoices from the informer was the subject matter of the Tribunals decision in the case of Pan Parag India Ltd. vide Final Order No.621-625/2012-Ex (Br) dated 23.5.2012, detailed order was passed considering evidenciary value of such documents provided by the informer. By referring to various decisions of the Tribunal in the case of Farooq Desai vs. CC, Mumbai-2000 (118) ELT 641 (Tri.) as also to the decision in the case of Chandrakant H.Sanghvi vs. CC, Sheva-2000 (121) ELT 788 (Tri.), it was held that procured documents supplied by an informer do not legally constitute an acceptable evidence and hardly an evidence of credible nature, as the informer is obviously a person much interested in the outcome of the proceedings either for his reward or other factors which motivated him tendering information. Referecne was also made to majority decision in the case of Kuber Tobacco Ltd. vide order No.A-83/110/2012 dated 3.2.2012 where the credibility of seized documents were doubted on the basis of discrepancies drawn in Panchnama and non-disclosure of various factors like the source of obtaining keys of the rooms, availability of persons in the premises, the nature of use of the premises etc. By applying the ratio of the above decisions to the fact of recovery of 72 invoices, we are of the view that confirmation of demand in respect of said invoices is not sustainable. It was held that no reliance can be made on such documents. In the present case, apart from observing that Revenue has procured 18 photocopies of invoices from the trade tax department and balance 56 from the informer, there is otherwise no evidence to conclusively reflect upon the fact that said 72 invoices stand issued by the appellants clearing their final products without payment of duty.

16. In any case, we find that Revenue has conducted investigation in respect of said 72 invoices from the alleged recipient of final product. The statement of 14 dealers was recorded during the course of investigaton by showing them only 12 invoices. It is seen that only 2 dealers accepted receiving bags of pan masala under the cover of the said invoices. Even these two dealers retracted their statements during cross examination by deposing that the said statement was given under pressure. Balance 12 dealers denied having received the goods under the cover of invoices of Patel Brothers/Anju Agencies. When most of the dealers have denied receiving pan masala and only two dealers who admitted have also retracted their statement during cross examianton, we are of the view that there is no corroboration to such invoices, apart from the fact that the said invoices can also not be considered to be legitimate evidence having been received from unknown source. We also find favour with the arguments of the ld.Advocate that out of 74 invoices, at least 17 invoices are under the signature of Shri Jayant Misra Alias Rajan, who was issuing invoices prior to August, 1999 and the statement of Shri Jayant Misra was not recorded. Subsequenlty Shri Rajnish Tiwari, who was employed with Patel Brothers since, August, 1999 was entrusted job of issuing invoices. Some of the invoices referred to by the adjudicating authority bears the signatureos Shri Rajnish Tiwari. Reference can be made to invoice No.316 date 31.05.1999 and 334 dated 3.6.1999. If Rajnish Tiwari was working with effect from August, 1999, we really fail to understand as to how invoices recovered from the trade tax department are showing signatures for the month of May, 1999 and June, 1999, when he was not in employment of Patel Brothers. The said fact itself reflected upon fabricated nature of invoices in question. Reliance was placed by the Revenue on the statement of driver or supervisor as they had stated in a generic way that in a truck they were normally transporting 70 bags. This averment of the drivers and supervisors could not be accepted on its face value as they were not confronted with 72 invoices where the quantity ranged from 15 to 150 bags and only in 15% cases the quantity was 70 bags. In fact, they were not even shown single invoice either of higher quantity or of reduced quantity. Ld.Advocate submits that the invoices being seized by the Revenue also shows the quantity of 150 bags in some of them and as such statements of the driver and supervisor cannot be held to be correct reflection of fact. It is well settled law that the charge of of clandestine removal are required to be proved on the basis of positive evidence and cannot be made on the basis of assumption and presumption. Confirmation of demand based upon the recovery of 72 invoices (photocopies) the source of which is not available, cannot be upheld. As such, we find no justifiable reasons to uphold such confirmation of demand of Rs.85.77 lakhs based upon the said recovery of 72 invoices from the informer or the trade tax department.

Second part of the demand of duty of Rs.63,97,85,850/- is based upon 4557 invocies reconstructed from the hard disc of CPU data of M/s.Anju Agencies for the period 1998-99 to 2001-02. The adjudicating authority has held that based upon the quantity shown in the 72 invoices received by them from the informer or the trade tax department, 4557 invoices showing clearances of one to five bags is not correct and quantity cleared under these invoices has to be taken as 70 bags per invoice. Accordingly a chart is prepared by the Revenue showing actual clearance of the goods in excess than the number of bags reflected in the said invoices. The allegation of the Revenue against M/s.Anju Agencies and Patel Brothers is that the invoices raised by them were returned by the buyers after the goods arrived at the destination and number of bags were reduced from 1 to 5 bags from the original 70 bags. Based upon the chart so prepared on the above basis demand of Rs.63.97 crorres stands raised and confirmed.

We find that premises of Anju Agencies, dealer of HSG was searched on 4.7.2001 but hard copies of invoices, were not seized, as is clear from the panchmana of M/s.Anju Agencies. It is however seen that though the computers of the said distributor was put under seizer but data entered therein was not retrieved in the office of M/s.Anju Agencies. It was only subsequently that the computers were handed over to one expert M/s.Stellar and as per their report dated 2.5.2002, the original data entered in the computer had been superimposed and as such it was not possible to retrieve the same.

16. After appreciating the submissions made by both sides, we find that the demand of duty of Rs.63.97 crores stands confirmed on the basis of 4557 invoices which stand reconstructed out of the alleged deleted data in the hard disc of Anju Agencies and Patel Brothers. In fact no such copies of these 4557 invoices stand retrieved from the computer but a chart has been prepared by M/s.Stellar & Co. and based upon the quantity of 70 per invoice shown in 72 invoices procured from informer, the total no. of bags allegedly cleared clandestinely stands arrived at. As the adjducating authority has held that the quantity shown in the 72 invoices received by them from the informer and the trade tax department was 70 bags, whereas the said dealers have shown the clearance from 1 to 5 bags under 4557 invoices, the clearance shown in the said 4557 invoices is also required to be enhanced to 70 bags per invoice. Such confirmation of demand of duty is thus, based upon the editing of the original entries of quantiies, value and consginee of actual sale in the sale invoices of Patel Brothers and Anju Agencies.

Original copies of the said 4557 invoices were not put to seizure by the visiting staff at the Anju Agencies premises on 4.7.2001. The Commissioner has merely enhanced the quantum of clearances as reflected in the said invoices from 1 to 5 bags to 70 bags based upon report of M/s.Stellar & Co. The said report dated 2.5.2002 is available as exhbit No.38. Report is to the effect that where the original data had been later superimposed, it is not possible to retrieve the original data. As such, without retrieval of the original data showing clearances of 70 bags as per allegation of the Revenue, a chart stands prepared to enhancement of clearance of 70 bags based upon the copies of 72 invocies, received from the informer and trade tax department. We have already held that such procurement of invoices from the informer of the tax department cannot be held to sufficient evidence of clandestine removal inasmuch as neither source of informer stands disclosed nor the receipt of invoices from the trade tax department was under panchnama. We further note that even as per allegation of the Revenue the said 72 invoices recovered from informer and tax department were original invoices whereas corresponding 72 invoices in the computer of M/s. Anju Agencies showed less clearances. The Stellar & Co. in its report, has also observed that wherever original data, has been superimposed, the same cannot be retrieved. If that be so, there is no answer to the Revenues case as to how copies of 72 invoices were retrieved from the computer, of M/s.Anju Agencies, when accourding to the Revenue the same were superimposed and as per report of Stellar, superimposed invoices cannot be retrieved.

Revennue has also relied upon the statement of Shri Rajnish Tiwari, wherein he deposed that he started editing the invoices only from the last two months. He stated that prior to that the actual details of invoices were being deleted from the computer of Anju Agencies. The said statement stands assailed by the appellants as factually incorrect. Even if same is accepted to be true, the same does not advance Revenues case as even according to the said statement the data was being superimposed only for the last two months and prior to this the data was being deleted from the computer. If that be so, how Revenue can arrive at a finding that the number of bags cleared under the said 4557 invoices were invariable 70 bags in each case, which were brought down to 1 to 5 by editing the same in the original invoices. We further find that the said 4557 invoices have no where been compared with the original invoices issued by dealers Anju Agencies and Patel Brothers. Ld.Advocate has shown us that in many cases, Anju Agencies and Patel Brothers were showing clearances of more than 70 bags in the invoices raised by them. On scrutiny of the said invoices, we find that some number of bags cleared under one invoice is around 80, 85, 90, 100 which is admittedly more than 70. As such, Revenues case that in each invoices they were clearing 70 bags which was subsequently reduced to 1-5 bags does not have any feet to stand. In any case, we find that the said confirmation of demand is only the basis of the chart prepared by M/.Stellar & Co. by increasing the number of clearances at the dealers end, which in turn is based upon 72 photocopies of invoices received by the Revenue. The appellants had taken categotical stand that the invoices issued by Anju Agencies and Patel Brothers were fully tallying with the invoices issued by HSG to the said dealers. Confirmation of the demand against HSG based upon reconstruction of computer data of Anju Agencies and Patel Brothers cannot be held to be appropriate. Admittedly said invoices stand issued by the sole selling agent and not by the manufacturer HSG. If at all, confirmation of demand of duty based upon computer retrieved data of the sole selling agent which is also doubtful, can never be held to be in accordance with law. We also note that though some of the dealers have been confronted with 72 invoices (only part of them) but there is no statement of any dealer in respect of 4557 invoices on the basis of which huge demand of Rs.63.97 crores stands confirmed.

17. We may here deal with the appellants submission that the accounts books maintained by M/s.Anju Agencies and Patel Brothers cannot be held to be acceptable evidence inasmuch as the same are pertaining to a third party. It is seen that the appellants before the Commissioner, relied upon the decision of the Honble Allahabad High Court in the case of Lalit Kumar vs. Assistant Collector of Central Excise, Meerut-1983 (14) ELT 2208 held that bahikhatas seized from Chandra Prakash wherein he deposed that the same belonged to his son Lalit Kumar were held as not admissible evidence even though Lalit Kumar on two different stages admitted that the same to be related to his business. Honble High Court observed that inspite of admissions of Lalit Kumar that entries in bahikhatas were not proved to be relatable to business of Lalit Kumar no presumption as regard truthfull nature can be made under section 67 of the Gold (Control) Act. The Commissioner has held that said decision is not applicable to the facts of the case inasmuch as in that case Bahikhatas entries there is no corroborative evidence to substantiate the entries of bahikhatas but in the present case on account of data retrieved seized from other party corroborated movement of clandestine removal of pan masala by HSG. Similarly he has held that the Tribunals decision in the case of Ram Shyam Paper Ltd. laying down that confirmation of duty based on records seized from a third party, even though the third pary having business relantionship with the appellant are not sufficient as the appellant cannot be held liable to each and every entries made by a third party in their books of accounts. He again observed that inasmuch as in the present case two vehicles loaded with pan masala from the premises of HSG have been seized, it leads to conclusion that the documents resumed from the third party are admissible evidence.

18. Similarly, the Tribunal in the case of Ambica Chemicals vs. CCE, Chennai-2002 (148) ELT 101 (Tri.) laying down that entries made in the note books maintained by chemist of firm with regard to production of various leather chemicals cannot establish clandestine removal, stands distinguished by observation that in the present case there is tangible evidence for purchase of inputs or production and sale of items and receipt of consideration.

We note that the said retrieved data from the computer records of M/s.Anu Agencies and Patel Brothers, though cannot be strictly considered to be documents of a third party nevertheless M/s.Anju Agencies and Patel Brothers are different entities than M/s.HSG. As such records maintained by them are required to be considered that the print outs were made the sole basis for confirmation of demand against M/s.HSG. The Commissioners finding that there is corroboration in the manner that the two trucks found to be loaded with pan masala were seized by the officers and admittedly the same were loaded at the factory of HSG whereas bills issued by Anju Agencies, is indicative of the fact that the invoices raised by Anju Agencies can be made basis for showing clearances of goods by HSG. Admitedly, the bags seized from the outside the premises of HSG were loaded in their factory and were covered by two invoices issued by Anju Agencies. There is no dispute about the said fact. Ld.Advocate has also explained that sometime the goods are directly loaded from the factory of HSG in respect of bills issued by Anju Agencies instead of first moving the goods to the premises of Anju Agencies and from there to the dealers premises. In any case, this fact by itself cannot be held to be indicative of clandestine removal in all transactions, in view of the decisions as already discussed. Various authorities in the cases referred to above, have held that entries picked up from a third party premises have to be proved beyond reasonable doubt why production of positive and congent evidence and the same cannot be simpliciter made the sole basis for confirmation of demand.

As we have already observed that the said confirmation of demand is on the sole basis of enhancing number of bags in the 4557 invoices, whch is in turn based on 72 invoices, we find that there is virtually no other evidence on record to reflect upon clandestine manufacture or clearance of the goods. For duty evasion of duty of Rs.63.97 crores, the value of the goods cleared clandestinely would be much on the higher side which requires systematic procedure to obtain various raw materials required for production of such huge quantity. There is virtually no evidence as regards procurement of various raw materials required for manufacture of such huge quantity of pan masala. Ld.Advocate has placed on record a formula requiring various raw materials and their percentage used in the manufacture of final products. There is virtually no evidence showing procurement of such huge raw materials required for production of huge quantity of final product. Further, there is no evidence of receipt of consideration in cash against clearance and sale of high quantity of pan masala. Such huge evasion of tax cannot be achieved without leaving beyond trail of some proof reflecting upon the illegal activity. In respect of statements relating to the allegations, confirmation of demand on each basis, we proprose to deal with the same in detail, at subsequent part of the order. Suffice it to say at this stage the said confirmation of demand based on sole allegation that the goods cleared under 4557 invoices which were invariably of 70 bags though the appellants have shown 1 to 5 bags cannot be upheld without there being evidence and corroboration to the said allegation. It is settled principle of law that charges of clandestine manufacature and clearances are required to be proved beyond doubt by production of sufficient evidence and not on the basis of assumptions and presumptions.

At this stage, we take note of the Honble Delhi High Courts decision in the case of Dharambir vs. Central Bureau of Investigation vide its order dated 11.3.2008 (page 52), it stands observed by Honble Delhi High Court that there are six levels of memory in the hard discs and therefore an information which was written and then rewritten upon more than 5 times could still be retrieved from the subcutaneous memory of the hard disc. Even if there is a doubt whether that entire information can be reconstructed, certainly the information to the effect that the memory in the hard disc has been written and rewritten upon for over six times would be available. It is possible to analyze a hard disc with the help of a software programme, to find out on what date the information was first written with the exact time of such change. It is possible to retrieve such information in respect of each of the occasions when such information is removed and reinserted or changed on the hard disc.

In terms of the said decision, it is possible to retrieve information stored in the computer, even if such information is deleted or changed on the hard disc. Revenue has not shown any reason as to why the original invoices which according to the Revenue cleared 70 bags per invoices could not be retrieved.

Revenue, in support of the above allegation, has referred to some of the instances of refueling of the trucks in question. However, we find that such instances are negligible and do not lead to inevitable conclusiton that such refueling was for the purpose of transportation of clandestiney manufacture and clearance of pan masala. No dealer of pan masala has admitted having made any cash payment either to Anju Agencies or Patel Brothers or HSG. No dealers have ever stated that they were sending the original copies of the invoices back to Anju Agencies or Patel Brothers. We also note that HSG are using regular eight vehicles for transportation of their final products, out of which two vehicles were Vikrams which had capacity to transport only 35 bags. As such, recording of statements of transporters that they were normally transporing 70 bags on these vehicles, cannot be held to be a corroborative evidence on the ground that some of the vehicles were not capable of transporting 70 bags. However, truthfulness of the said statement stands belied on the ground that there were admittedly invoices showing clearances of more than 70 bags, thus leading to fact that more than 70 bags were also being transported in the bigger trucks. As such, demand of duty on the finding that it was always 70 bags which were being transported by the appellants is based upon assumption and presumption and cannot be held to be sustainable.

Demand of duty of Rs.30.31 crores-

19. We find that said demand is based upon the documents retrieved by the Stellar from the computers seized from the various premises. Revenue has chosen to call the said documents as R documents.

As per facts on records, we find that the CPUs were seized from premises of Mahesh & Co., HSG, Anju Agencies, Gopal Grindng Industries and Sanathan Cold Storage during the time of search on 04.07.2001. It is seen that thereafter said computers were lying with the Revenue for a considerable period of time. Mirror images from the CPUs were taken on fresh hard discs by Stellar on 20.1.2002. Thereafter report of retrieved documents was received from Stellar on 2.5.2002.

The appellants have strongly contended that at the time of seizure of the computers, the same were not sealed as is evident from the fact that sealing is not mentioned in the panchnama showing seizure of the computer. Thereafter the computers were lying with the Revenue for a period of more than 4 months and subsequently sent to Stellar. As such reconstructed/retrieved data from the said computers which were not even sealed at time of the seizure, cannot be considered to be legal evidences. The said data having been retrieved from the computers after a gap of 10 months and that too at the back of the appellants, cannot be relied upon for the purpose of clandestine removal allegation. Revenue during the course of arguments has not been able to show as to whether the said computers were sealed at the time of seizure and subsequently de-sealed in the office of Stellar. There is no explanation putforth as to where the computers were kept during intervening period of their seizure and subsequently sending of the same to the office of Stellar. It also does not stand explained as to whether Stellar had de-sealed the computers in the presence of the appellants and retrieved data, after giving notice to them. As such, we agree with ld.Advocate that there is every possibility of mischief done with the said retrieved data by any interested person. When there are glaring procedural lapses in following proper procedure prescribed under the law, we are of the view that reliance on the said R documents is not proper.

Apart from above, we note that Stellar has nowhere given any report to the effect that said R documents stand recovered from the CPUs of HSG. As per certificate given by them, CPUs contained particular number of files which were scattered and they have reconstructed the same which shows mention of invoice either deleted or manipulated by way of overwriting. However, there is no clarification from Stellar as to which computer belonged to which assessee and from which computer the said data stands retrived by them. In the absence of said clarification by Stellar, Revenue cannot assume and presume that said R documents were retrieved from the CPUs of HSG. In fact, we find that it stands alleged by the Revenue in the show cause notice that retrieved documents are taken from the hard disc of various firms in which case and as such, as rightly argaued by ld.Advocate that they cannot be held to be as exclusively belonging to HSG. As such, in the absence of any evidence, Revenues endeavour to establish that R documents belonged to HSG is neither justified nor warranted.

We further note that the said documents contained Column Dispatch wherein some words in abbreviated form such as SBD, SANDILA, HRI, SPN, JAIN, STP, GOLA, PUWAYAN, MANOLI etc. were written. No investigation stands made by the Revenue as to for what these abbreviated words stood for. No effort has been made to find out whether the same were the names of the parties or names of the places or stand for anything else. It is on record that the entire productions of M/s.HSG were cleared to their agents M/s.Patel Brothers or Anju Agencies. If that be so, there is no question of any direct sale by HSG to different private parties. M/s.Anju Agenceis had 16 sub dealers. The that said dealers have been confronted with only 72 invoices received from the informer and trade tax department and their statements were recorded, wherein they had very clearly deposed that they had never received pan masala against cash. Apart from the above, there is no statements of the dealers in respect of said R documents neither they have been made parties in respect of said R documents. We also note that said R documents contained details such as bank, and cash balance etc. However, Revenue has not conducted any enquiry from their bank or has not produced any evidence as to how huge cash, as reflected in the said R documents has been collected by the appellants. Revenue has tried to establish authenticity of the said documents by comparing the same to entries made in 32 loose sheets recovered from the appellants premises. Though the appellants have advanced their arguments in respect of 32 loose sheets with which we shall deal with appropriate place, we find that mere co-relation of some entries in the 32 loose sheets with the entries of R docuements, is no reason or ground to hold that all these R documents were valid documents for the purpose of upholding charge of clandestine removal against the appellants M/s.HSG.

Huge demand of Rs.30.31 crores stands exclusively confirmed by the adjudicating authority on the basis of R documents allegedly retrieved/reconstructed by Stellar without specifying as to which computer the same were retrieved. As already observed, Stellar has not given identification of CPUs from where said documents were reconstructed, according to the Stellar these were deleted entries. We also note from various statements of various representatives of the appellants wherein no person has admitted such R documents reconstructed by Stellar from the CPU of HSG. We note that Shri Amit Srivastava in his statement has nowhere admitted that these documents, afer having entered in the computer were subsequently deleted. We are of the view that investigaton conducted by the Revenue in respect of R documents do not lead to any inevitable conclusion of clandestine manufacture or clearance of the final products.

At this stage we shall deal with general submissons made by the ld.Advocate in respect of confirmation of demand made on the basis of 4557 invoices and R documents. It stands specifically argued before us that for manufacture of pan masala various raw materials are required in different quantities. They have given the detailed list of various raw materials alongwith percentage required for manufacture of the appellants final products which already stands reproduced by us while dealingwith the issue of receipt of supari from M/s.Mahesh & Co. It stands strongly contended before us that Revenue has confirmed demand of duty only on the basis of deleted/superimposed/overwriting data allegedly retrieved from the computer. There is virtually no evidence of procurement of raw materials. The Revenue has not explained as to how the appellants could have procured such huge raw materials against cash transaction and could use the same for the manufacture of their final products, which according to the Revenue, stands sold against cash.

We find that apart form the receipt of supari from Mahesh & Co. in which case, we have already confirmed the demand, there is otherwise no material on record to reflect upon the fact of illegal procurement of various raw materials. In any case, having already held that supari stands received by appellants from Mahesh & Co. and having upheld duty confirmation of said amount, even if we accept R documents relied upon by the Revenue reflect upon clandestine clearance of the goods, it has to be held that it is same final products, which stands manufactured out of unaccounted supari received from Mahesh & Co. which stands sold under R documents. We note that the demand of duty is based upon the receipt of unaccounted supari from Mahesh & Co and subsequently separate demand is confirmed on the basis of R documents showing clearance of final products. Ld.ASG, as already noted above, has agreed that the demand of duty on multiple level points is not proper and to that extent impugned order is not correct. Inasmuch as there is no independent evidence showing that clearance made under R documents was relatable to final products out of supari sent by Mahesh & Co. We find no reason to uphold the present demand of Rs.30.31 crores.

Ld.Advocate appearing for HSG has also strongly relied upon the provisons of section 36B of Central Excise Act, 1944. For better appreciation, the said section is reproduced below:-

Section 36B.Admissiblity of micro films, facsimile copies of documents and computer printouts as documents and as evidence. (1) Notwithstanding anything contained in any other law for the time being in force,

a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or

b) a facsimile copy of a document; or

c) a statement contained in a document and included in a printed material produced by a computer (hereinafter referred to as a computer printout), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.

(2) The conditions referred to in sub-section (1) in respect of a computer printout shall be the following, namely:

a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;

b) during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived;

c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and

d) the information contained in the statement reproduced or is derived from information supplied to the computer in the ordinary course of the said activities.

(3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether

a) by a combination of computers operating over that period; or

b) by different computers operating in succession over that period; or

c) by different combinations of computers operating in succession over that period; or

d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly.

(4) In any proceedings under this Act and the rules made thereunder where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say,

a) identifying the document containing the statement and describing the manner in which it was produced;

b) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer;

c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate,and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.

(5) For the purposes of this section,

a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;

b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;

c) a document shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.

Explanation. For the purposes of this section,

a) computer means any device that receives, stores and processes data, applying stipulated processes to the information and supplying results of these processes; and

b) any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process. As is seen from the above, the computer print out is admissible piece of evidence subject to satisfaction of certain condition enumerated in sub section (2) of 36B. It is seen that M/s.Stellar had not retrived any computer print out in the factory of the appellants and it had only reconstructed or rebuilt data based upon its own obsersation in respect of data stored in the said computer. What is the meaning of reconsctructed data does not stand explained anywhere by M/s.Stellar. No data stands recovered from the CPU of the respective parties in the same form in which it was stored. No computer pintouts under section 36B were taken from the computer in the presence of party. As such reconstructed data by an expert, without retrieving original data from the computer and without specifying ownership of computer does not satisfty the provisons of section 36B. Apart from that M/s.Stellar itself admitted that it is not possible to retrieve superimposed data and they have only retrieved the deleted information. However, during the course of examination, they had admitted that data in the hard disk was contiguous files and also fragmented files. They have further admitted that their software recovered deleted, fragmented data based files to an extent and they have got limited capacity of showing whether files has been over written or not. HSG has also filed an affidavit of Shri Pankaj Mathur, Director Technolgy of M/s. Unistal Systems Pvt.Ltd. detailing therein as under:

As a data recovery expert I understand that output of data recovered after superimposition is never authentic. It is just a partial recovery. This method of reconstruction is useful in cases where commercial information is not there. There is a very high probability that some old data from un-linked clusters may be recovered during the reconstruction process. . Human errors and typographical errors are very common in computer data entry. Any accounting software has complex interlinking, this means that many different files are linked and then actual results are generated. For linking, all files must have original names and must be placed in actual folder path.

The said certificate was not adhered to by the Adjudicating Authority. He was not called for cross examination by the Commissioner. For all the reasons discussed above, we agree with the ld.Advocate that generic nor specific reference submitted by M/s,.Stellar cannot be pressed into service for confirmation of huge demand against the appellants.

Duty demand of Rs.2,11,56,742/-

20. The said demand stands confirmed on the basis of difference in receipt of supari as recorded in the balance sheets, purchase invoices and stock register when compared with the quantity entered in Form-IV register. The adjudicating authority has held that said difference in receipt of supari stands used by the appellants for manufacture of their final products which stands cleared by them without payment of duty. The difference in the statutory records maintained by the appellants stands explained by them. It was categorically contended that the quantity recorded in the balance sheets and stock register were of uncut supari whereas the quantity accounted in Form-IV register was in respect of cut supari received after grinding and crushing by M/s.Gopal Grinding Industries. During the process of cutting and grinding, wastage arises and difference in the two records is on account of such wastage.

The Commissioner has not accepted the above plea of the appellants on the ground that Form-IV register only mentions the word supari and does not mention cut or uncut supari. He has further observed that in terms of Rule 55 of Central Excise Rules,1944, raw materials received by the appellants has to be entered as such. Inasmuch as raw materials received by the appellants was uncut supari, it has to be held that entries in the form-IV register were of uncut supari. There is difference in the quantity of uncut supari as recorded in the balace sheets and form-IV register. He has held the said quantity having been used in the manufacture of pan masala thus confirmation of demand of duty of Rs.2,11,56,742/-.

The appellants have contended that relying on the said Rule 55 of Central Excise Rules is not proper inasmuch as the said rule was omitted vide Notification No.15/98-CE (NT) dated 2.6.1998 whereas the period of dispute is from 1998-89 to 2001-02. In any case, we find that apart from difference in the quantity of supari as reflected in the balance sheets and as recorded in form-IV register, there is no evidence to show that the said differential amount of supari was used by the appellants in clandestine manufacture and clearance of their final products. Even this difference stands explained by the appellant by submitting that the quantity of supari as entered in their balance sheets was of uncut supari and entries in form-IV register were made after receipt of cut supari from M/s.Gopal Grinding Industries. Admitedly after receipt of supari from Mahesh & Co. the same was being sent to M/s.Gopal Grinding Industries, who were the job workers of HSG and after cutting, grinding and crushing of supari, the same was sent back by Gopal Grindng Industries to HSG. Entries in Form-IV register reflected upon the quantity of such cut supari sent by Gopal Grinding Industries. During the process of cutting of supari, some wastage is bound to arise. The difference in quantity as reflected in the two records is on account of wastage. In any case, we find find that there being no evidence even remotely justifying the use of such differential amount of supari in the manufactaure of pan masala and gutkha, confirmation of demand of duty on this ground is not sustainable. The same is accordingly set aside.

Duty demand of Rs.53,51,429/-

21. The said demand of duty also stands confirmed on the allegation and finding of clandestine removal, which in turn, are based upon the discrepancies in the invoice number or their dates, etc. The appellants have explained that the said discrepancies were clerical mistakes in making entries in their records in respect of the some challan/ invoices etc. The Commissioner has not accepted such defence of the appellants by observing that no evidence of clerical mistakes stands produced by the assessees. As we have already held that the allegation of clandestine manufacture cannot be upheld on filmsy grounds without there being detailed evidence, we are of the view that confirmation of demand of duty on the basis of such clerical errors as detailed in the impugned order are not to be upheld. Accordignly, the same are set aside.

Duty demand of Rs.28,03,168/-

22. The said demand stands confirmed on the ground that quantity of 11,446.270 kgs was less carried forward in the opening balance of 01.04.2001. The appellants have explained that some stock lying with Gopal Grinding Industries was wrongly included in the computer and the mistake was rectified. The Commissioner has not accepted the above plea of the appellant on the ground that while rectifying the mistake, there is no remark or indication was given explaining the disprepancy by the appellants.

We find no justifiable reason to confirm the said demand in the absence of any other evidence to show that the said quantity stands cleared by the appellants without payment of duty. We accordingly set aside the same.

13. The appellants have also made general submissions reflecting upon the fact that it was not possible to manufacture such huge quantity of pan masala and gutkha, as alleged by the Revenue. They have given details of packing machines installed in the factory of HSD from time to time which is as under:-

04.05.1998: 16 machines 02.01.1999: 9 machines 01.11.1999: 17 machines 19.11.2000: 12 machines Total: 54 machines.

The appellants contention is that as per National Productivity Council report, the production would be 72 pouches per minute per machine. Such output can be achieved only if all machines are in operation without any break down or power cut or raw material shortage or labour problem etc. Even according to the panchnama drawn by the visiting officers on 24.12.2001 only 25 machines were running and 4 were not running. Speed of various machines per minute found to be ranging from 49 pouches to 117 pouches per minute. With the above installed capacity, it was impossible and impracticable to manufacture such huge quanatity of pan masala and gutkha as alleged by the Revenue.

We find that it is not the case of the Revenue that tempering was done with pouch making machines in order to increase their capacity of production. The adjudicating authority has placed reliance on the statement dated 10.1.2002 of Shri M.M.Garg of Rollon Packaging Machines deposing that as per catalogue of the machines, speed ranging between 60 to 120 pouches per minute which could be further adjusted. Reliance was also placed on 32 loose sheets showing that factory was working in two shifts per day. Further the statements of Shri Vinod Kumar Verma and Shri Vishnu Narain Pandey dated 11.10.2001 were also referred to conclude that HSG were reflecting under production of their final products.

The Director of Rollon Packaging Machines, Shri M.M.Garg was cross examined during adjudication and submitted that the claim of the manufacturer in catalogue about the speed of machine was exaggerated and once they had sold the machines they could not verify any adjustment. We also note that Shri Rajneesh Tiwari in his statement dated 4.7.2001 deposed that the factory of HSG was running one shift from 10 am to 6 pm. Shri Vinod Kumar Verma and Shri Vishnu Narain Pandey retracted their statements during the process of cross examination. In any case, we find that installed capacity of the appellant is not sufficient to produce the alleged quantity of pan masal and gutkha in addition to production shown by HSG in their stautory records. The Revenue has not made any efforts to show that the appellants were fully equipped to manufacture such huge quantity of pan masala. As such on this gournd also confirmation of demand, based upon the different evidences cannot be upheld.

The Revenue also placed reliance on the 32 loose sheets allegedly recovered from the appellants factory showing daily production for the period from 16.05.2001 upto 30.5.2001 which revealed that their factory was running in two shifts a day. The said 32 loose sheets allegedly signed by Shri Vinod Kumar Verma and Shri Vishnu Narain Pandey, employees of HSG. As per the said 32 loose sheets, production recorded in the same 6484 bags whereas HSG shown and accounted for 849 bags. As such, Revenue alleged that over production and under accounting by HSG.

We note that HSG has taken categorical stand that the said 32 loose sheets were never seized from their factory on 4.7.2001. The same did not bear signature of any person and as such should not be relied upon. The Commissioner has observed that the said 32 loose sheets bear signature of Shri Mukesh Bajpai and accepted the same as genuine. However, we find that Shri Mukesh Bajpai signed on said 32 loose sheets on 25.6.2002 at the time of recording of his statement. His signatures were not present on the loose sheets when the same are allegedly seized in the panchnama drawn on 4.7.2001 referred to as loose miscellnaoeus papers filed in a folder against sl.No.188 to Annexure C to the Panchnama. This serial number nowhere gives details of 32 loose sheets and there is only reference to 132 loose sheets. As per the appellants if the officers have specifically mentioned the description of documents seized by them as is clear from the serial number, there is no justification as to why discreption of the said 32 loose sheets was not mentioned.

We, having gone through the above contentions of ld.Advocate, are of the view that these 32 loose sheets are relied upon to arrive at the no. of workers or production capacity or production during the relevant period. There is no separate demand of duty in respect of said loose sheets. Having discussed the evidence in respect of each entire set of evidence, we find no reason to elaborately deal with the said of 32 loose sheets.

23. We may at this stage deal with various statements recorded by Revenue during the course of investigatons and referred to and relied upon by the adjudicating authority. Shri Mukesh Bajpai is authorized signatory and manager of HSG. His statements were recorded on 4.7.2001 (two times) and 25.6.2002. In the said statements Shri Mukesh Bajpai apart from disclosing that Anju Agencies was the sole selling agent and the factory of HSG was running in two shifts from 10 am to 6 pm and 8 pm to 4 am and usually 400 boras were being manufacatuared per day in both the shifts whereas they were reflecting 75 bags in their statutory records, has also clarified that usually they loaded 70 boras in one truck on the strength of bills, which are subsequently retruned after the goods reached the destination and invoices are changed from 70 bags to 1-3 bags. He also submitted that the accounts of HSG are manipulated by Shri Rajneesh Tiwari and in his absence by Shri Amit Srivastata. It was also submitted by him that they were accounting for 20% of the raw material received by them. He also clarified that they were purchasing supari from Mahesh & Co., tobacco from Bangalore and katha from P.C.Traders. As regard supari purchased by HSG from Mahesh & Co., he submitted that 306660 kgs supar was purhchased during 2000-01 and during the subsequent financial year 2001-02 till 30.06.2001, 1,20,775 kgs supari was purchased against cash. As regard 32 loose sheets, he showed his ignorance and as regards R documents deposed that he did not have knowledge of the same.

The statements of Shri Amit Srivastava, who was the assistant manager of HSG were recored on 4.7.2001, 6.7.2001 and 6.5.2001. He also disclosed that if the invoices are returned by the buyers after receipt of the goods, the same are either deleted or number of bags reduced to 1-2 bag. He also deposed that after delivery of the goods invoices were being destroyed by them. As regard R documents, he deposed that he has no knowledge of the same.

The statements of Shri Rajneesh Tiwari, Manager of Anju Agencies were recoded on 4.7.2001 (two statements) as also on 5.7.2001, 10.5.2002 and 20.6.2002. He submitted that initially, after receipt of the goods by the customers, they used to delete the records but for the last two months, the same are edited by reducing the quantity of bags cleared, this job was being done by Shri Ranjan before his joining in August, 1999. He further submitted that the factory was running daily between 10 am to 6 pm. He also stated that he has no knowdlege of R documents.

The statements of Shri Mahesh Singh, Managing Director of HSG were recorded on 25.7.2001, 23.8.2001, 11.10.2001, 15.1.2002, 23.1.2002, 24.1.2002, 6.5.2002 and 7.5.2002. It is seen from the statement recorded on 25.7.2001, that he was shown the various statements of Shri Mukesh Bajpai, Amit Srivastava and Amit Tiwari which he initially did not agree but the words did not agree which were written in Hindi language were subsequently crossed and he stated that he was in agreement with the statements. The said statement was retracted next day. As regards running of factory, he submitted that the factory was running in two shifts about 3-4 days in a month. He denied having done any editing in the invoices issued by them but he also clarified that only 22 to 25 labourers working in the factory of HSG and all machines installed in the factory are not always running. Some of them are non functional and some are used for manufacturing of gift packing. He submitted that the goods cleared by them were always accompanied with bills. As regards R doucuments, Shri Mahesh Singh in his statement stated that these documents did not belong to his firm and his computer operator has shown his ignorance about the same. He also denied having received any excess lamination from Flex Industries.

The statement of Shri Anjani Kumar, computer operator of M/s.Mahesh & Co. was recorded on 26.11.2001 wherein he clearly deposed that he never received any cash relating to cash sales bills nor he has met any customer purchasing in cash. During cross examination, he revealed that it was Shri Mahesh Singh, who used to give him list containing particulars of the quantity and sale price of the goods for preparation of computer cash bills and the said list was under the handwriting of Shri Anant Kumar Verma who was cashier cum godown keeper of Mahesh & Co. He stated that he has never stated that supari sold in cash were actually diverted to HSG.

Apart from above, the statements of various dealers, the statements of various drivers/supervisors were also recorded during the investigation period. It may be clarified here that statements of dealers were recorded only in respect of 72 invoices. All the dealers except two denied having received pan masala and gutkha under the cover of these invoices. Even two dealers retracted from their statements during cross examination. Dealers statements were not recorded in respect of R documents or the other 4557 invoices and surprisingly no questions were put to them as regard the receipt of pan masala/gutkha under the cover of said documents.

24. The above statements stands relied upon by the Adjudicating authority. The appellants have strongloy contended that confirmation of demand on duty on the basis of statements of co-noticees alone cannot be upheld, without there being any corroborative evidence. By referring to the detailed statements, ld.Advocate Shri Anand has contedend that the Commissioner has referred only to that part of the statement which were inculpatory and has not considered exculpatory part of the statement. Even the deponents of the statements have retracted their statements during the course of cross examination. By referring to various contradictions in the statements, he has submitted that same cannot be held to be true reflection of correct factual positon.

25. We note that there are admittedly material contradictions in the said statements of employees of HSG, Anju Agencies/Patel Brothers as also in the statement of Shri Mahesh Singh, Managing Director of the HSG. Whereas Shri Mukesh Bajpai and Shri Amit Srivastava in their statements have deposed that the factory was running in two shifts, Shri Rajneesh Tiwari in his statement stated that the factory was running only in one shift. Further, Shri Mahesh Singh has stated that it is only on some days that the factory was running in two shifts. Similarly, there is a discrepancy in respect of number of regular labour and daily wagers, employees of HSG. All deponents have denied having knowledge of R documents. Further, it is also seen that it has come on record that HSG werer also selling the lower number of bags ranging from 1-5 from their factory gate. Further though the statements of Shri Mukesh Bajpai and Shri Amit Srivastava as also of Shri Rajneesh Tiwari had stated that the invoices issued to the dealers for 70 bags were subsequently edited to 1-5 bags, but we find that Shir Mahesh Singh, Managing Director of HSG had clearly stated in his statement that no such editing was done by him. Further as per the statement of Shri Rajneesh Tiwari, who joined HSG with effect from August, 1999, HSG was selling 1-2 bags from their factory gate and the customer was taking the delivery of the said bags himself. He also deposed that modus operandi of editing invoices from 70 bags to 5 bags was adopted by HSG only from the last two months and prior to that records were being deleted. If that be so, Revenue has not explained as to why all the invoices showng clearances has been raised to quantum of 70 bags per invoice for the entire period; as such, we are of the view that there are glaring contradictions in the statements of all the deponents. Further, it is well settled law that the statements alone cannot be relied upon solely for confirmation of demand of duty on the finding of clandestine removal. Such demand requires corroboration of material facts, which as already discussed by us in the preceding parapgraphs, are not forthcoming from the Revenue. We also find that whenever such statements stand corroborated by production of relevant records, like in the case of Mahesh & Co., demand already stands confirmed.

26. It may also be observed that authorized representative of HSG in their statements have stated that the records were manipulated by them after the goods were received by their dealers. Revenue has not bothered to make out any investigations at the end of dealers. The statements of dealers stands recorded only in respect of 72 invoices received from the informer and trade tax department but no question was ever put forth at the time of recording of their statements, as to whether they had actually received 70 bags against invoices showing clearances of 1-5 bags and as to whether the invoices received alongwith the goods were being sent by them back to HSG for lowering the quantum of bags therein. As such, we agree with the Advocate that contradictory statements of authorized representatives, which also stands rectracted and clarified by them at the time of cross examination, cannot be held to be sufficient evidence, without there being any corroboration of the same, so as to uphold the charges of huge evasion of duty. The deponents of statements also appeared for cross examianton before the adjudicating authority and clarified that such recording of statements was under pressure. The adjudicating authority, by relying upon the said statements has held that each and every invoices used by HSG was invariably covering 70 bags and has confirmed the duty accordingly. It may also not be out of place here that not even single copy of allegedly original invoice showing clearance of 70 bags was recovered either from the premises of HSG or Anju Agencies/Patel Brothers. Though Shri Mukesh Bajipai died during adjudication proceedings and could not be cross examined but an affidavit dated 16.7.2001 sworn by him stands placed on record stating that during period of search, he was under extreme pressure to write whatever he was dictated. The appellants have relied upon the Honble Supreme Courts decision in the case of Parle Beverages Pvt.Ltd. vs. CCE, Bombay-1998 (98) ELT 585 (SC) laying that evidenciary value of affidavit cannot be brushed aside and the department is bound to go into the probative value of the statement made in the affidavit. They have also relied upon the decision of Honble High Court of Andhra Pradesh in the case of Somaguta Sivasankara Reddy Vs.Palapandia China Gangappa vide their order dated 23.11.2001 observing that the evidence of a person who has died after examination in chief and as by reason of his death could not be produced for cross examination, his affidavit is admissible in evidence, the weight and probative value thereto would vary from case to case and in a given case may also be disregarded.

We have already observed that the statements stand either retracted or clarified during the course of cross examination and were contradictory in nature as not reflecting the correct fact and do not stand corroborated by independent evidence, we are of the view that much reliance cannot be placed on such statements.

27. It is the grievance of the appellants that the adjudicating authority has not considered the evidence which became available at the time of cross examination in the form of deponents various statements. Having allowed cross examination of such witnesses, it was not open to the Commissioner not to accept the outcome of the same unless he has proved the falsity of the same by further examination of such witnesses. Inasmuch as result of cross exmiantion has not been contradicted by the adjudicating authority, we agree that he was bound by the evidence which came on records.

28. Having dealt with various aspects, of demand in question, and having confirmed the demand in resepcst of supari received from Mahesh & Co. and having observed subsequent confirmation of demand on different evidences recovered from different premises are nothing but multiple fixations of demands in respect of the same very goods, we may here deal with the common issue raised by the appellants. We note that it is well settled principle of law that allegation and finding of clandestine removal of goods are required to be proved by Revenue and discharged with sufficient and positive evidence and cannot be based on suspicion against the appellants. Such evidence required to be produced by the Revenue may not be with mathematical precision but the same should be sufficient to reflect upon the fact that the assessee had actually manufactured the final products and has cleared the same without payment of duty. Such evidence would be required in respect of various various raw materials required to manufacture the final products. The same would include payment made to supplier of raw materials, which are bound to be in cash. Further, it is also required to be shown that the manufacturer has capacity to manufacture alleged quantity of final products. The goods manufactured by the assessee are also required to be marketed by him in clandestine manner. For the said purpose, the buyer to whom such clandestine manufactured goods stands supplied are also required to be identified and evidence to show the receipt of payments by the manufacturer from the said buyers are required to be produced on records. We are not suggesting that for clandestine manufacture, Revenue is required to produce evidence upto the last decimal point to prove the fact of clandestine manufacture and clearance in each and every transacations. However, broad principles, as laid down by various decisions of the judicial and quasi judicial authority has led us to observe that for arriving at finding of clandestine manufacture even on the basis of preponderance of probability, Revenue is expected to make out the case of clandestine removal based upon the admissible evidence. The charge of clandestine removal is serious and quasi criminal chrge and cannot be upheld on the basis of assumptions and presumptions. Doubt, however, story, cannot take the place of legal evidence. Absolute proof of clandestine manufacture and clearance may be not available in a particular case but the proof should be of such standard that leads one to come to inevitable conclusioin of clandestine manufacture and clearance of final products without payment of duty. The proceedings relating to clandestine manufacture are quasi criminal proceedings inasmuch as if upheld concerned persons are liable to prosecution in terms of provisions of Section 9 9A, 9AA of Central Excise Act, 1944. The question as to whether the said proceedings are quasi criminal or simply civil proceedings resulting in confirmation of demand stands disclosed in detail by the Tribunal in the case of Pan Parag India Ltd. vide Final Order No.621-625/2012-Ex (Br) dated 23.5.2012,. For better appreciation para 50 is reproduced below:-

During the course of arguments, a question arose as to whether the proceedings under the Central Excise Act are civil proceedings or quasi criminal/criminal proceedings, requiring a proof beyond reasonable doubt to establish the charge of clandestine removal. Ld. Advocate has submitted that the consequence of the relied upon documents without any explanation on the source of their acquisition and in the light of the Managing Directors statement, questioning genuineness of the same and indicating the fabricated nature is of serious nature and the burden to prove the genuineness and authenticity of the same lies very highly upon the Revenue. Admittedly, apart from placing financial burden on the manufacturer resulting in confirmation of demand of duty u/s 11A and imposition of penalties upon them, prosecution is also one of the consequences. Such prosecution is in the nature of criminal law as provided under section 9 of Central Excise Act and may result in imprisonment of Directors/Managing Director or other concerned employees. Ld. Advocate has relied upon the Honble Supreme Courts decision in the case of Vinod Solanki reported in 2009(233)ELT157 wherein while dealing with various provisions of Foreign Exchange Regulation Act, 1973, it was observed in para 17 that proceedings under the said Act are quasi criminal in nature. Particular support from above observations stands drawn by us as the proceedings under the Central Excise Act are similar in nature to the proceedings under FERA Act, 1973 resulting in confirmation of demand and imposition of penalties to the extent of 100% as also for launching of prosecution against the manufacturer in terms of provisions of section 9 and 9AA, 9B & 9C of Central Excise Act. The offence if proved are punishable with a imprisonment or a term which may be extended to seven years with fine.

Similarly the Honble Supreme Court in the case of Tukaram Dighole reported in 210(4)SCC329 while dealing with the issue of election petition and the evidentiary value of documents placed on record laid down the following precedent law:-

(a) A mere production of VHS cassettes was not sufficient. Further evidence was required to be adduced to prove as to how the said cassettes were obtained by the appellant.

(b) In that case the charge of corrupt practices is equated with a criminal liability and, therefore, standard of proof would not be preponderance of probabilities as in a civil action, but proof beyond reasonable doubt as in a criminal trial.

(c) If stringent test of proof is not applied, a serious prejudice is likely to be caused to the successful candidate whose election would not only be set aside, but he may also incur disqualification to contest an election for a certain period, adversely affecting his political carrier. Thus, a heavy onus lies on election petitioner to prove charge of corrupt practice in the same way as a criminal charge is proved. In the absence of any cogent evidence regarding the source and the manner of its acquisition, the authenticity of the cassette was not proved and it could not be read in evidence despite the fact that the cassette is a public document. No relevant material was brought to our notice which would impel us to hold that the finding by the Tribunal is perverse, warranting our interference. It is the contention of the ld. Advocate that the legal proposition as laid down by Honble Supreme Court are equally applicable to the fact of the present case in as much as the Revenue has not brought proof beyond reasonable doubt to substantiate the allegation of clandestine removal based upon documents, the source of which is not disclosed. He submits that if these documents are accepted, the same would result in huge unwarranted financial liabilities on the appellants along with launching of criminal proceedings against the Directors. It is their contention that in the case of Tukaram, the issue is only setting aside the election of the candidate even than the Honble Supreme Court observed that standard of proof would not be preponderance of probabilities as in a civil action and evidence to proof beyond reasonable doubt is required as in the criminal trial. As such he submits that the present proceedings being quasi criminal, the standard of proof should be beyond reasonable doubt and not on preponderance of probabilities. Reliance also stands placed on Tribunals decision in the case of Chandan Tobacco Co. reported in 2011(270)ELT87 observing that the charges of clandestine removal are quasi criminal and requires production of positive and tangible evidences. On the other hand Shri Raha has placed reliance on the decisions of Tribunal in the case of Buta Steels P.Ltd. reported in 2004(167)ELT536; Devidas Garg reported in 2010(257)ELT289 and in the case of D.Bhuramal reported in 1983(13)ELT1546(SC) in support of his contention that Revenue is not expected to proof its case with 100% mathematical calculation and preponderance and probabilities should be adopted as criteria for establishing the case of clandestine removal. As such by referring to the various sourced documents and the result of investigation, he submits that going by the reasonable prudent mans view, it can be safely concluded that the appellant had been indulging in clandestine activities.

In rejoinder Shri Anand submits that the reliance of Shri Raha in case of Buta Steels P.Ltd. is misplaced in as much as the facts are not identical. In the case of Buta Steels P.Ltd., GEQD report was not disputed by the appellants and it was in these circumstances, the duty demand was upheld against them whereas in the present case, the genuineness of the source documents stands disputed by the appellants along with the contest to GEQD report. The Honble Supreme Court in the case of Shri Bhagwan Das reported in 1974(4)SCC46 has held that evidence of a hand writing expert, unlike that of finger print expert is generally of frail character and its fallibility have been quite often noticed. The courts should therefore, be wary to give too much importance to evidence of hand writing expert. The conclusion based upon mere comparison of hand writing must yield to the positive evidence in the case.

Similarly the decision in the case of Devidas relied upon by the Revenue has no applicability to the facts of the case in as much as fictitious firms were floated in the name of S.K.Gautam who was working as Pujari in the temple in the house of R.K.Garg. He also submits that while disposing of the appeal no findings on the demand confirmation were given by the Tribunal and as such it appeared that duty demand was not contested by the manufacturer. In any case, we find that facts and circumstances available in each and every case are required to be scrutinised for concluding the activities of clandestine activities, it is only broad principles enunciated in various decisions which have to be followed, in as much as no two cases involving clandestine allegation can be of similar nature in respect of evidences.

Meeting with Shri Rahas reliance on the Honble Supreme Courts decision, he submits that his contention that duty can be confirmed on the basis of circumstantial evidence, does not flow from the above decision. He submits that the said judgement stands considered by various courts and by holding that the same relates to the goods which were found to be of smuggled nature, the same was not followed. He draws our attention to various decision where the decision of the Apex Court in the case of D.Bhuramal stands distinguished on the ground that the same is not applicable to the legal issue that even where there is no admissible evidence available, demands can be confirmed on the basis of presumptions.

We note that the Commissioner in various parts of his order has himself observed that there was no direct evidence of clandestine removal of the case. However, he proceeded to confirm the demand by observing that it was not necessary to link clandestine removal without any break and mathematical procedure of each entry was not required to be proved. We find that the theory of preponderance of probabilities adopted by the adjudicating authority is applicable only when there are strong evidences leading to only one and one conclusion of clandestine activities. The said theory cannot be adopted in cases of weak evidences of doubtful nature. Admittedly Revenue cannot be accepted to prove its case upto the last degree but the least accepted is that the evidences brought on record should be logical and inspiring confidence in the Revenues case. The decision cannot be arrived on the basis of figment of imagination and unwarranted assumptions in as much as the distance between may be and must be is a long distance required to be travelled by production of at least acceptable positive evidences.

We also note that the Honble Supreme Court in the case of D.Bhuramal were taken note by the Honble Supreme Court in another decision in the case of O.Konavalov reported in 2006(197)ELT3(SC) involving the issue of seamen wages under the maritime law. By dealing with the contention of applicability of D.Bhuramal judgement, it was observed that in as much as that decision related to goods which were found to be of smuggled nature, the said ratio of law cannot be invoked for confiscating the vessel. The said decision was also considered by the Tribunal in the case of R.A.Castings P.Ltd. reported in 2009(237)ELT674 wherein the judgement was distinguished and it was held that the allegation of clandestine removal of the final product, based on electricity consumption are required to be proved by production of positive and tangible evidences and not on the basis of theoritical calculations. The said decision of the Tribunal stands confirmed by the Honble Allahabad High Court as reported in 2011(269)ELT337. Subsequent appeal by the Revenue before the Honble Supreme Court also stands dismissed as reflected in 2011(269)ELTA106.

In view of our foregoing discussions, it becomes clear that the charges of clandestine removal which also result in criminal liabilities by way of prosecution of concerned persons are required to be proved by sufficient evidences and cannot be decided on the basis of some documents which came into the possession of Revenue from nowhere. Even the examination of the said documents have led us to conclude that they are fabricated documents and which at the most can raise doubt against the appellants but cannot fasten duty liability on the same. We have already discussed the evidentiary value of loading slips as also the other documents used by the Revenue for corroborating the loading slips.

When viewed in the light of the above decisions referred to by us, we note that the investigation in the present case do not lead to the logical end and do not result in the alleged clandestine activities on the part of the appellants. Apart from the loading slips which we have already held as not carrying much evidentiary value, there is virtually no evidence on record to establish clandestine activities of the appellants. The said loading slips along with other documents could have been the starting point of the investigation which have failed miserably at the hands of Revenue. They have failed to establish the source of acquisition of Kattha and Supari by M/s Ekta. Further as rightly contended by the appellants, the manufacturer of their final product required number of other raw materials. There is not even an iota of evidence to show procurement of such other raw materials. Admittedly in the absence of all the raw materials, the appellants could not have manufactured their final product. Even the source of procurement of other raw materials like Kattha and Supari does not get substantiated by production of any evidence to that effect. Even the suppliers of the raw materials does not stand identified by the Revenue. To manufacture such huge quantity of final product, the appellants required all the raw materials to the same extent. There is no whisper of procurement of such huge raw materials.

Apart from above, we note that the final product allegedly cleared clandestinely is for further sale in the market. As such there need to be certain buyers for the same. There is no evidence on record as to whom the said alleged clandestinely manufactured final product stands sold by the appellants. Further, there is no evidence showing as to how the consideration for the same stands received by them from various buyers. In the absence of all these details, confirmation of demand based upon procurement of loading slips from unknown sources cannot be upheld.

At this stage, we may proceed to refer to some of the decisions dealing with the issue of clandestine activities of the assessee and laying down that such charges connotes accusations of serious nature and are required to be established with cogent evidences and while the evidence cannot be discarded totally, the same should be scrutinised and examined carefully.

29. We may here discuss some of the decisions strongly relied upon by ld.Advocate in the case of CBI vs. V.C.Shukla-1998 (3) SCC 410, Honble Supreme Court, while dealing with section 34 of the Evidence Act, 1872 held that two parts of the said secton explained that entries in books of accounts must be required to be kept in the course of business which meaning and the import of ordinary,natural and grammatical meaning should be ascribed as file containing loose sheets, papers having entries made therein cannot be held to be admissible under section 34 of Evidence Act. Elaborating further it stands observed by Honble Supreme Court that such entries in the books of accounts shall not alone be sufficient evidenc to charge any person with liability and such entries, even if relevant are only corroborative evidence and independent evidence has to be trustworthiness of those entries necessary to fasten the liability. It may be worthwhile to mention the Tribunals decision in the case of T.G.L.Poshak Corporation vs. CCE, Hyderabad-2002 (140) ELT 187 (Tri.) wherein the Tribunal, in para 2 of their order took note of various decisions on the subject of clandestine removal and held that the allegations are to be proved by production of evidence, the same being of serious charge against the manufacturer. In para 3 of the said judgement, the Tribunal upheld the finding of the Commissioner laying that the department is required to investigate various aspects like production details, procurement of raw materials, dispatch particualars from the lorry booking offices/regular transporters, realization of sale proceeds, power generation and finished products receipt details from the regular dealers etc. Applying the principle laid down in the above case, we find that the Revenue in the present case has primarialy relied upon the reconstructed computer documents, which we have already held doubtfull in nature. Further, Honble Supreme Court in the case of Anjlus Dungdung vs.State of Jharkhand-2005 9 SCC 765 has observed that circumstances may raise strong suspcision against the appellant, but it is well settled that suspicion, howver, strong may it may be, cannot take the place of proof. Further ld.Advocate also referred to the various decisions laying down mere inculpatory statement which stands retracted at the time of cross examination are by itself no ground for confirmation of demand. We need not refer to all the decisions relied upon by both sides as suffice it to say that the Revenue has not been able to prove by concrete evidence to establish clandestine removal so as to uphold the demand against the appellant, except the demand in respect of the receipt of supari from Mahesh & Co.

29. When we view and examine the evidence relied upon by the Revenue in light of the broad principle of law, as discussed above, we find that the entire case of Revenue is based upon the statements of various persons; documents procured by them from the informer, without even properly disclosing the source of the same; on the basis of some retrieved/reconstructed documents, which stands converted into a chart by M/s.Stellar without even producing such documents, and we are of the view that Revenue has not been able to establish its case effectively even for the purpose of implying principle of preponderance of probability. The Tribunal in the case of Kuber Tobacco (P) Ltd. vide Final Order No.A/83-110/2012-Ex (DB) has held that even for the applicability of preponderance of probability principle, there has to be sufficient evidence on records so as to uphold the charge of clandestine manufacture. As we have found that the sale of supari by Mahesh & Co. against cash bills read with statements of their authorized representatives and inability of HSG to explain non recording of the same and the fact that evidence showing grinding of the same by Gopal Grinding Industries is available, the demand of duty stands confirmed. Apart from confirmation of that duty, we find no justifiable reason to confirm balance demand raised on different set of facts and circumstances, as discussed by us in the preceding paragraphs.

2.Show Cause Notice dt.26.06.2002

30. The said show cause notice deals with seizure and confiscation of the goods recoverd from M/s.HSG and other places as also the goods seized during transit and confiscation of the vehicles.

It is seen that during the course of search of factory of HSG, 55 bags totally valued at Rs.1,47,500/- were seized on the ground that same were not entered in the record. The appellant had taken a plea that 55 bags were production of the same very day and were to be entered in the record at the end of the day. However, the adjudicating authority has not accepted the above stand and has referred to the fact that raw materials, required for production of said 55 bags were neither issued from form-IV register nor was there any material issue slip or production slip. As such, he has concluded that said produciton of 55 bags was out of unaccounted raw materials and was intended to be cleared by the appellants without accountal in the records. Accordingly, he has confiscated the same. Inasmuch as the same were released provisionally, he has appropriated an amount of Rs.1,23,750/- from the FDR deposit of the party.

The appellants have not challenged the above confiscation and have not produced any evidence on record to rebut the finding of the adjudicating authority. Accodigny we uphold the confiscastion of the above 55 bags.

31. Demand of Rs.8.26 lakhs stands confirmed in respect of 306 bags seized from Anju Agencies and one bag seized from Papu Salesman, 30 bags seized from Ansari Kirana Stores and 140 bags seized in transit on 4.7.2001. The appellants have challenged the said demand on the ground that said seizure was from the third party premises and it cannot be held that the said goods were cleared by HSG without payment of duty in the absence of evidence to the contrary. They have also contended that since Anju Agencies was their stock holder, and bags of pan masala/gutkha found at their factory premises could be out of the goods cleared by HSG, confirmation of demand of duty on this count is not justified. On the other hand, the Commissioner has confirmed the demand by observing that either Anju Agencies or HSG could not produce the evidence in respect of showing clearance of 306 bags of pan masala, confirmation of demand is justified.

As regard confirmation of the said demand of duty, we find that admittedly the entire production of HSG was being cleared to Anju Agencies who were further clearing the same after raising the invoice in the name of sub dealer.

It seen that the recorded stock of M/s,Anju Agencies was nil on the date of visit of the officers. As such, the presence of 306 bags in the premises of M/s.Anju Agencies, under the cover of invoices, is required to be explained by them. Neither Anju Agencies nor HSG were able to produce any evidence to show that the said 306 bags were received by M/s.Anju Agencies from HSG under the cover of duty paying documents. No doubt the goods recovered from the premises of third person are required to be treated as duty paid goods unless contrary is proved but in the present case we find that the entire production of HSG were cleared to M/s.Anju Agencies who were selling the same to various dealers. It is also on record that Anju Agencies was not procuring the goods from any other source. As such, onus to prove that 306 bags recovered from the premises of M/s.Anju Agencies were duty paid lies heavily upon them, especially when we have held that HSG were indulging in clandestine clearances and upheld confirmation of demand in respect of supari received from Mahesh & Co. In the absence of any documentary proof to show that said 306 bags seized from the preemies of Anju Agencies were actually cleared by HSG on payment of duty, we are of the view that the duty of Rs.8.26 lakhs in respect of said bags is required to be confirmed and bags in question are held liable to confiscation. We accordingly uphold the confirmation of said demand alongwith imposition of penalty and confiscation of the bags.

32. It is further seen that two consignments of gutkha covered by two invoice no.607 and 608 dated 4.7.2001 issued by Anju Agencies were intercepted by the officers and the statements of drivers and supervisors were recorded wherein they deposed that the said goods were loaded from HSG but the sale invoice was issued by Anju Agencies. The Commissioner has upheld confiscation of the said seized goods alongwith confiscation of the trucks by observing that the goods were loaded from the factory premises of HSG whereas bills were issued from Anju Agencies. He has held that bills issued for 70 bags of pan masala as part of modus operandi as disclosed by Rajneesh Tiwari of Anju Agencies in his statement dated 4.7.2001, that after delivery of the goods, the bills would be returned and reduced to quantity of 1 to 5 bags.

We find no merit in the above stand of the Commissioner. Apart from the fact that we have already observed that such allegations made by the Revenue are not sustainable, we also note that confiscation of seized goods on the basis of any doubtful future action of the assessee cannot be accepted, especially when the goods are covered by sale invoices issued by dealers of HSG. Further, there is no evidence to reflect upon the fact that said goods seized during transit were cleared by HSG without payment of duty. The fact that the goods wre loaded from the factory gage of HSG, whereas the bills were issued by M/s.Anju Agencies stand explained by ld.Advocate that instead of first off-loading the goods at M/s.Anju Agencies premises, the same are loaded in the trucks from HSG factory gate for onward transportation to the customers, as per directions of M/s.Anju Agencies. In any case, we note that the transportaion was under the cover of valid invoices issued by M/s.Anju Agencies and as such, the Commissioniers findings cannot be upheld. We accordingly set aside confirmation of duty demand and imposition of penalty alongwith confiscation of trucks, etc. involved in the case.

3.Show Cause Notice dt.11.12.2002

33. Vide the said show cause notice, the Commissioner has confiscated various trucks used in the alleged clandestine transportation of pan masala/gutkha by HSG and imposition of penalty on various persons. The allegation made in the said show cause notice are in respect of first show cause notice issued on 31.1.2003 relatable to alleged clandestine removal of gutkha and evasion of duty of Rs.137 crores. It does not stand disclosed by the Revenue as to why the show cause notice proposing confiscation of trucks and imposition of penalties on various related persons was issued separately and was not made part of the main show cause notice dated 31.1.2003. Be as it may be, as we have already held that the demand of duty can be confirmed in respect of supari received by HSG from Mahesh & Co. and the matter stands remanded for quantification of the same, we deem it fit that the matter under the said SCN also be remanded to the Commissioner for re-deciding the use of trucks, imposition of penanlty on truck owners or drivers or for the purpose of imposition of penalties on various dealers etc. for de novo decision, in the light of observations made by us.

34. In view of the above foregoing discussions, we confirm the demand in respect of supari received from Mahesh & Co. and remand the matter back to the Commissioner for re-quantification of the duty demand and after allowing the wastage in accordance with law and to re-decide the quantum of penalties, as also in respect of 306 bags and the demand raised against HSG in respect of other evidence stands set aside on the basis of discussion made in the relevant paragraphs. Inamsuch as penalties on various dealers/drivers/transporters, authorized representatives etc. stand imposed by the Commissioner are on the basis of evasion of duty by HSG and as we have already upheld the confirmation of demand against HSG ony in respect of supari received by them from Mahesh & Co. and 306 bags etc. we remand the matter to the Commissioner for adjudging the penal liabilities of various persons afresh in the light of the above finding. Other two show cause notices also stand disposed of as discussed in the order.

(Pronounced in the open court on 02.07.2013) (ARCHANA WADHWA) MEMBER (JUDICIAL) (SAHAB SINGH) MEMBER (TECHNICAL mk

35. I have carefully gone through the proposed order recorded by learned sister Mrs. Archana Wadhwa, Member (Judicial), but with utmost respect to her, I have different views in the matter and I am recording a separate order.

36. Brief facts of the case, details of three Show Cause Notices, allegations made against the appellants, details of evidences, brief submission of the appellants and Revenue have been fairly narrated in the proposed order. I therefore feel no necessity of repeating the same.

(A) Show Cause Notice dated 31.1.2003.

Demand of duty of Rs.22,43,58,638/-

In case of this demand I fully agree with Honble Member (Judicial) that Mahesh & Co. was diverting Supari to HSG and all cash bills raised by them are in fact in respect of supari so diverted and confirmation of demand on this count is justified. However, I am of the view that instead of remanding the matter, following the earlier decision of Tribunal in their own case after allowing 10% wastage on quantity of supari during the process of grinding, demand of Rs.19,51,22,505 is required to be confirmed against the appellant and consequently penalty is also to be confirmed on the appellant.

Demand of Rs.63,97,85,850/-

This demand is based on 74 sale bills/invoices issued by Patel Brothers and Anju Agencies sole selling agent, of HSGPL. Out of these 74 invoices/sale bills, 72 were given by informer and 2 by Trade Tax Department. Hard copies of these bills/invoices were retrieved/printed from the computer of Anju Agencies on 4.7.2001. On comparison it was noticed that quantity shown in bills/invoices is reduced to one or two and name of consignee, vehicle numbers were deleted. To corroborate evasion of duty the Revenue recorded the statement of various persons. Mr. Rajnesh Tewari, Manager of Anju Agencies in his statement recorded on 4.7.2001, 5.7.2001 and 6.7.2001 explained the modus operandi of evasion of duty by HSGPL. He has admitted that as per instructions he used to go to factory of HSGPL and load the goods in trucks and invoices were made in the computer of Anju Agencies for entire quantity for delivery but in the evening after confirmation of delivery of goods by truck drivers, both copies of sale bills/invoices showing the full quantity were destroyed by him and such bills/invoices were deleted/edited in the computer by him. In his absence this work was done by Shri Amit Srivastava and prior to his joining by Shri Jayant MIshra. Shri Amit Srivastava also confirmed in his statement modus operandi as narrated by Shri Rajnesh Tewari and he identified the invoices prepared by him. Shri Mukesh Bajpai, authorised signatory of HSGPL also stated in his statement that bags of Gutkha were loaded from factory and bills/invoices were made in computer of Anju Agencies and after delivery of goods bills/invoices were returned and destroyed.

37. Demand of Rs.85.77 lakhs is in respect of clearances made against the 74 invoices. It is the contention of the appellant HSGPL that since these invoices/bills were neither seized from their factory nor from any of their employees, demand cannot be confirmed against them relying on documents retrieved from computer of third parties. In this regard, I find that under Section 36A of the Central Excise Act documents which have been seized from premises or control of a particular person can be used against them. In this case, Mahesh & Co., Gopal Grinding Industries, Anju Agencies etc. are family concerns of Shri Mahesh Singh. From the statement of various persons/employees of these organisations, it is established fact these are under direct control of Shri Mahesh Singh and any documents seized from control of Shri Mahesh Singh can be used as evidences against HSGPL in light of Section 36A of the Central Excise Act.

38. Appellants also contend that out of 74 invoices, Deptt. has investigated the receipt of the goods by dealers in respect of 12 invoices and only two dealers has confirmed it. I find that investigation has been done by the department right from the factory stage, and statements of authorised signatory Shri Mukesh Bajpai, Shri Rajneesh Tewari of Anju Agency, Amit Srivatava and statement of 2 supervisors, statement of 4 drivers were recorded. One of dealer has categorically admitted the receipt of 80 bags for Anju Agencies. Moreover it is also on record that vehicles (except one vehicle which had the capacity of 30 bags.) had the capacity of carrying 70 bags and it is highly improbable that any prudent manufacture would use these vehicle for transporting just 1-5 bags. Therefore in my view there is no infirmity in Order-in-Original with regard to confirmation of demand of Rs.85.77 lakhs.

39. Appellants have placed reliance on decision of this Tribunal in case of Pan Parag and Kuber Tobacco (supra). In case of clandestine removal of goods, each case has different facts and different modus oprandi and these cases therefore cannot be relied on in other cases of evasion of duty based on clandestine removal of goods. Therefore in my view decision in case of Pan Parag and Kuber Tobacco are not applicable to the facts of the present case.

40, Other part of demand of Rs.63,97,85,850/- is based on invoices recovered from the computer hard drive of Anju Agency in the year 1998-1999 to 2001-2002 and involves 4557 invoices and demand has been calculated on the basis of 70 bags in truck through invoices show 1-5 bags only.

41. Appellants have contended that hard copies of invoices were not seized and data was not retrieved in the office of Anju Agencies and there is time gap between handing over of computers to Steller and submission of the report. Therefore, these invoices cannot be relied upon in confirming the demand. I find that CPU was seized from M/s Anju Agencies. Shri Rajneesh Tewari, Manager of Anju Agencies had admitted in his statement dated 4.7.2001 that CPU was sealed and taken into custody and it bears the signatures of witnesses and himself. Moreover when Rajneesh Tewari was produced before Magistrate after his arrest he did not make any complaint about any content of seizure Panchnama. Regarding allegation of fabrication of evidences in computer during the custody of same with Central Excise officers, I find that Commissioner has examined case file relating the seizure of CPU and it was observed that CPU was opened and resealed six times between 4.7.2001 to 23.1.2002. On two occasions 4.7.2001 and 6.7.2001 it was opened and resealed in presence of Shri Rajneesh Tewari, Manager of Anju Agency. In his statement that 4.7.2001 and 6.7.2001 this aspect has been mentioned. In remaining 4 occasions CPU was opened and resealed after drawing a proper Panchnama in presence of independent witnesses. Therefore finding of the Commissioner in rejecting the allegation of fabrication of evidences during the custody of CPU has considerable force and is sustained. Regarding contention of the appellants since provision of Section 36B have not been complied with; 4557 invoices reconstructed from CPU cannot be relied on. It is noticed that Section 65B of Indian Evidence Act deals with admissibility of electronic record whereas Section 36B deals with computer print out and facsimile etc. Both Section 65B of India Evidence Act and Section 36B of CEA are pari materia and lay down the same guidelines. Therefore case law relating to Section 65B of Indian Evidence Act are applicable to Section 36B of the CEA also. According to Revenue data stored in hard drives, pen drive and floppy device are electronic record in view of Karnataka High Court judgment in case of Stovekraft Vs. JDDR-I 2007 (214) ELT 175 (Kar.). In view of this decision data retrieved from hard drives is admissible as evidence under Section 65B of the Indian Evidence Act and consequently under Section 36B of the Central Excise Act also. Also in view of judgement of Supreme Court in case of State of NCT Vs. Navjot Sandhu (2005) 11 SCC 6000 call records which are electronic records can be printed out and used as evidence even if all requirement of Section 65B are not complied with. The Court has also held to prove authenticity of print out/electronic record it is sufficient that person who is fairly familiar with computer system and its output certifies the same to be correct. In view of these observations of Supreme Court retrieved R documents which were retrieved from computers of Anju Agencies and direct print out taken from computers of Anju Agencies in presence of computer operator. Shri Rajneesh Tewari who certified these print out as authentic and true are admissible as evidence under Section 36B of the Central Excise Act. In view of the above decision of the Supreme Court, since computer operator has certified the authenticity of records showing unaccounted clearances at clearance stage demand of Rs.63,97,85,850/- as these evidences are admissible and authentic, is sustainable.

42. It is contention of HSGPL that records seized from Anju Agencies and Patel Brother cannot be used as evidences against them. This question has been dealt by the Commissioner as per 30.11 of the order. It is fact that Patel Brothers and Anju Agencies were sole selling agents of HSGPL and were dealing with only goods manufactured by HSGPL. Mrs. Anju Singh, Prop. of M/s Anju Agency and O.N. Singh of Patel Brothers in their statement recorded under Section 14 of the Central Excise Act admitted that they were only distributors of HSGPL. Moreover Shri Mahesh Singh in his statement recorded on 15.1.2002 has stated that Mrs. Anju Singh and O.N. Singh are proprietors of firms belonging to his family. These firms were under control of Shri Mahesh Singh and not dealing with goods manufactured by any other person. Therefore there is no reason to discard the evidences from records seized from Anju Agencies and Patel Brothers. Case laws relating to Lalit Kumar Vs. Asstt. Collector, Ambica Chemicals (supra) have rightly been distinguished by the Commissioner.

43. It is contended by the appellant that demand is raised on the basis of 4557 reconstructed invoices and there is no other corroborative evidence to support this demand. I find that a Show Cause Notice dated 26.6.2002 was issued to HSGPL which has been adjudicated by the Commissioner. On the day of visit of officers to their factory. 55 bags not accounted for in the records were seized. These 55 bags were confiscated and confiscation has been upheld in this order. Similarly 306 bags seized from Anju Agencies are confiscated by Commissioner and upheld in the present order. This shows that appellants are involved in evasion of duty on goods. Moreover I find that demand of Rs.22,43,58,638/- was issued on the basis of records of Mahesh & Co. in respect of uncut supari. This demand was confirmed by the Commissioner in the impugned order and is held to be sustainable (except allowing 10% wastage). These Evidences and demand of Rs.30 crore at production stage are corroborative evidences to sustain the demand of Rs.63,97,85,850 against the appellant I uphold the confirmation of this demand by Commissioner.

44. Demand of Rs.30,31,31,082/-

This demand is raised in para 40 (III) of the Show Cause Notice and is based on documents of M/s HSGPL and despatches routed through sole selling agents which were deleted from the computer and were reconstructed by Steller Information Systems Ltd.

45. Preliminary objection of the appellant is that evidence is fabricated by the department and R documents are not admissible as evidence. It is the contention of the appellant that CPU was not sealed and data retrieved was not available on hard drive on 4.7.2001.

46. I find that during the course of visit of officers CPU was seized from the factory of the party and Panchnama dated 4.7.2001 was drawn. Panchnama clearly mentions that one CPU was resumed from the factory. Case file pertaining to the CPU was examined by Commissioner and it was found that CPU has been opened and operated on 7 times on different dates on 9.8.2001, 10.8.2001, 27.9.2001, 10.10.2001, 16.10.2001, 6.11.2001 and 23.1.2002 and each time Panchnama was drawn and it was opened in presence of either Mahesh Singh or his authorised representative. Therefore I find that allegation of not sealing CPU and fabrication of evidences by the department has rightly been rejected by the Commissioner. Similarly the allegation that Steller has not clarified which CPU was seized from whom is also not sustainable as each CPU was seized under separate Panchnama drawn in presence of independent witnesses.

47. It is also contention of the appellant that R documents reconstructed from CPU are not reliable evidences and are not admissible evidences under Section 36B of Central Excise Act as all conditions of Section 36B are not met. In view of judgement of Supreme Court in case of State of NCT Vs. Navjot Sandhu (supra) retrieved R documents which were retrieved from the computers of HSGPL and Patel Brothers on the basis of which the present demand is raised at production stage are admissible as evidence. These documents are fully corroborated by 32 loose sheets whose authenticity has been established by statement of the employees who prepared them namely V.N. Pandey and Vinod Verma. This has been certified to be true by Mukesh Bajpai.

48. Appellants also rely on affidavit of Pankaj Mathur, Director Technology M/s Universal System (P) Ltd. in which he opined that data recovery after superimposition is partial recovery and is never authentic and this method is useful in non-commercial information. The observations made by Pankaj Mathur are of general nature and do not point out anything specific regarding any of the information retrieved from computers and relied upon by the department in this case. Moreover Commissioner in his finding has observed that M/s Steller Information is a reputed software expert for the process of data retrieval and its services have been used by other Govt. agencies Income Tax, CBI and Sales Tax etc. Therefore I do not find any infirmity in rejection of affidavit of Shri Pankaj Mathur by the Commissioner. I am therefore of the view that confirmation of this demand is sustainable.

(B) Show Cause Notice dated 11.12.2002 In respect of the Show Cause Notice, Commissioner has confiscated various vehicles used in clandestine transportation of pan masala/gutkha and imposed penalties on various persons in view of allegations made in the Show Cause Notice dated 11.12.2002. I agree with Member (Judicial) that Revenue has not disclosed why this Show Cause Notice dated 11.12.2002 was issued before the issue of main Show Cause Notice dated 31.1.2003. I am of the view that when no goods were not seized from the vehicles, confiscation of the same and imposition of penalty on vehicle owner is not justified. In my view, the proceeding initiated vide the Show Cause Notice are liable to be dropped.

49. In view of the above in my view in respect of Show Cause Notice dated 31.1.2003

(i) Confirmation of demand of duty of Rs.19,51,22,505, Rs.63,97,85,850 and Rs.30,31,31,082/- Total Rs.113,80,39,437 is upheld

(ii) Consequently penalty of Rs.113,80,39,437/- is imposable on HSGPL.

(iii) In view of reduction in amount of confirmed demand from Rs.137,63,64,467 to Rs.113,80,39,437/- penalty on Shri Mahesh Singh, Prop. of HSGCL stands reduced to Rs.8.5 crore

(iv) Penalty of Rs.2.5 crore on Shri Mahesh Singh, Prop. of Mahesh & Co. stands reduced to Rs.2 Crore due to reduction in confirmed amount from Rs.22,43,58,638/- to Rs.19,51,22,505.

50. In respect of Show Cause Notice dated 11.12.2002 finding of the Commissioner are not sustainable.

(Sahab Singh) Member (Technical) Difference of opinion Show Cause Notice dated 31.1.2003.

(i) Whether demand of Rs.22,43,58,638/- is required to be remanded as held by Member (Judicial) along with redetermination of penalty or demand of Rs.19,51,22,505/- is required to be confirmed as held by Member (Technical) along with imposition of penalty.

(ii) Whether demand of Rs.63,97,85,850/- is required to be set aside as held by Member (Judicial) along with setting aside of penalty or is required to be confirmed as held by Member (Technical) along with penalty.

(iii) Whether demand of Rs.30,31,31,082/- is required to be set aside as held by Member (Judicial) along with setting aside of penalty or is required to be confirmed as held by Member (Technical) along with penalty.

(iv) Whether the penalty on Shri Mahesh Singh, Proprietor of HSGPL is required to be readjudicated as held by Member (Judicial) or penalty of Rs.8.5 crores is required to be imposed on him as held by Member (Technical).

(v) Whether penalty of Rs.2.5 crore on Shri Mahesh Singh, Prop. Of Mahesh & Co. Is required to be readjudicated in remand as held by Member (Judicial) or penalty of Rs.2.0 crore is required to be confirmed on him as held by Member (Technical).

Show Cause Notice dated 11.12.2002 Whether the matter in respect of the Show Cause Notice is required to be remanded to Commissioner as held by Member (Judicial) or proceedings initiated under this Show Cause Notice are to be dropped as held by Member (Technical).

(Archana Wadhwa) Member (Judicial) (Sahab Singh) Member (Technical) RM

- 1 -

Legal Document View

Unlock Advanced Research with PRISMAI

Custom, Excise & Service Tax Tribunal

Flex Industries Ltd vs Cce, Lucknow on 2 July, 2013