Custom, Excise & Service Tax Tribunal
Shimla Food And Flavours vs C.C.E. Lucknow on 1 March, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
REGIONAL BENCH : ALLAHABAD
COURT No. I
APPEAL No.E/1815,1816,1850,2082/2009-EX[DB]
(Arising out of Order-in-Original No.01/Commissioner/LKO/CX/2009 dated
27/01/2009 passed by Commissioner, Central Excise, Lucknow)
M/s Shimla Food & Flavours ...Appellants
(In Appeal No.E/1815/2009-EX[DB])
Shri Ashok Kr.Gupta, Partner of M/s.Shimla Food & Flavours
(In Appeal No.E/1816/2009-EX[DB])
M/s Aanchal Polypack
(In Appeal No.E/1850/2009-EX[DB])
Shri Rajesh Kumar Gupta, Prop. M/s.Himachal Marketing Co.
(In Appeal No.E/2082/2009-EX[DB])
Vs.
Commissioner, Central Excise, Lucknow ...Respondent
APPEAL No.E/1004,1289,1290,1291,1292,1293,1317/2009-EX[DB] (Arising out of Order-in-Original No.02/Commissioner/LKO/CX/2009 dated 30/01/2009 passed by Commissioner, Central Excise, Lucknow) M/s Aanchal Polypack ...Appellants (In Appeal No.E/1004/2009-EX[DB]) M/s Shimla Food & Flavours (In Appeal No.E/1289/2009-EX[DB]) M/s Shimla Chemicals (In Appeal No.E/1290/2009-EX[DB]) Shri Rajesh Kumar Gupta, Prop. M/s. Himachal Marketing Co. (In Appeal No.E/1291/2009-EX[DB]) M/s Shimla Products (In Appeal No.E/1292/2009-EX[DB]) Shri Ashok Kumar Gupta, Partner of M/s.Shimla Food & Flavours (In Appeal No.E/1293/2009-EX[DB]) Shri Anil Kumar Gupta, Partner of M/s.Shimla Chemicals (In Appeal No.E/1317/2009-EX[DB]) Vs. Commissioner, Central Excise, Lucknow ...Respondents 2 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] Appearance:
Shri S.K.Pandey (Advocate), Shri A.P.Mathur (Advocate) & Shri Amit Awasthi (Advocate) for Appellant Shri Rajeev Ranjan, Addl.Commr. (AR), for Respondent CORAM:
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Hon'ble Mr. Anil G. Shakkarwar, Member (Technical) Date of Hearing : 28.01.2019 Date of Pronouncement : 01.03.2019 FINAL ORDER NO.70442-70452 / 2019 Per: Archana Wadhwa.
1. All the appeals, which are in the nature of two sets of appeals arising from two different orders are being disposed of by a common order as the same are arising from same set of facts and circumstances.
The details of the two orders confirming duties and imposing penalties are being shown below:-
Order-in-Original No. 01/Commissioner/LKO/CX/2009 Dt.
27/01/2009
Sr. Appeal No. Parties Names Duty Penalty
No.
1. E/1815/2009- Shimla Food & Rs.59,400/- Rs.1,17,642/-
EX[DB] Flavours
v.
CCE, Lucknow
2. E/1816/2009 Shri Ashok Kr.Gupta, Nil Rs.1,17,642/-
-EX[DB] Partner of M/s.Shimla
Food & Flavours
v.
CCE, Lucknow
3. E/1850/2009- Aanchal Polypack Nil Rs.4,58,242/-
EX[DB] v.
CCE, Lucknow
4. E/2082/2009- Rajesh Kumar Nil Rs.59,400/-
EX[DB] Gupta,
Prop.M/s.Himachal
Marketing Co.
3 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB] V. CCE, Lucknow Order-in-Original No. 02/Commissioner/LKO/CX/2009 Dt.
30/01/2009
Sr. Appeal No. Parties Names Duty Penalty
No.
1. E/1289/2009- Shimla Food & Rs.45,27,103/ Rs.45,27,103/-
EX[DB] Flavours -
v.
CCE, Lucknow
2. E/1290/2009- Shimla Chemicals Rs.72,76,500 Rs.72,76,500-
EX[DB] v.
CCE, Lucknow
3. E/1004/2009- Aanchal Polypack Nil Rs.1,18,03,603/-
EX[DB] v.
CCE, Lucknow
4. E/1291/2009- Rajesh Kumar Nil Rs.1,18,03,603/-
EX[DB] Gupta,
Prop.M/s.Himachal
Marketing Co.
V.
CCE, Lucknow
5. E/1292/2009- Shimla Products Nil Rs.1,18,03,603/-
EX[DB] V.
CCE, Lucknow
6. E/1293/2009- Ashok Kumar Nil Rs.1,18,03,603/-
EX[DB] Gupta
Partner of M/s.Shimla
Food & Flavours
v.
CCE, Lucknow
7. E/1317/2009- Anil Kumar Gupta, Nil Rs.1,18,03,603/-
EX[DB] Partner, M/s.Shimla
Chemicals
V.
CCE, Lucknow
2. As the facts involved in both the set of appellants have the same background, the same are being capitulated as under:-
One Shri Rajesh Kr. Gupta is the owner of 'Gomti' brand of Gutkha and is proprietor of M/s.Himachal Marketing Company, Lucknow 4 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] (hereinafter referred to as HMC). The said Shri Rajesh Kr. Gupta was getting the goods manufactured from M/s.Shimla Chemicals, during the period August 2003 to January 2004 and from M/s.Shimla Food & Flavours between the period January 2004 to March 2004. The entire Gutkha manufactured by the said two units was purchased by Shri Rajesh Kr. Gupta as proprietor of HMC and was further doing the trading in the same.
M/s.Shimla Chemicals located at 30C, Datia House, Khurshed Bagh, Lucknow (hereinafter referred to as SC) was a partnership firm with Shri Anil Kr.Gupta and his wife Mrs.Janaknandini as partners. They were engaged in the manufacture of 'Gomti' brand Gutkha till 18.01.2004. Thereafter M/s.Shimla Food and Flavours (hereinafter referred to as SFF) was created as a partnership firm with Shri Ashok Gupta and Mrs.Puspa Gupta, wife of Shri Rajender Gupta as partners and they started manufacturing 'Gomti' brand Gutkha since 19.01.2004, from the same premises where M/s.SC was located. Gutkha is chargeable to Central Excise duty under heading 2404.49 of the Central Excise Tariff Act.
M/s.Shimla Products (hereinafter referred to as SP) is a firm engaged in the manufacture of Supari. Shri Anil Kr.Gupta is partner of M/s. Shimla Products. M/s.HMC, a firm owned by Shri Rajesh Kr.Gupta is the sole selling agent of 'Gomti' brand Gutkha manufactured by SC and SFF. Shri Anil Kr.Gupta, Shri Ashok Kr.Gupta, Shri Rajesh Kr. Gupta and Shri Rajender Kr. Gupta are real brothers managing different firms with different partnerships, as detailed above. 5 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB] M/s.Aanchal Polypack is a manufacturing unit engaged in the manufacture of printed laminated rolls used for packing of Gutkha in pouches.
3. On 01.06.2004, the factory premises of SC/SFF, office cum godown premises of HMC, factory premises of SP, premises of M/s.Aanchal Polypack and the premises of one M/s.Lucknow Tulsipur Forwarding Agency, Lucknow, transporter and the premises of some dealers purchasing Gutkha were searched by the officers of Directorate General of Central Excise Intelligence. It is seen that during the search in the official premises of HMC, one van loaded with 22 bags of Gutkha was found to be parked near the said premises. On asking, the Central Excise documents in respect of the said 22 bags could not be produced by HMC. Therefore, the same was seized under a reasonable belief that the goods loaded in the premises have been cleared without payment of duty.
Further on search of the premises of the said noticee, 35 rolls of packaging material was found near the main gate of the factory premises. The authorized signatory of the said noticee explained that the said rolls stand received by them on the same day itself from M/s.Aanchal Polypack under the cover of a challan dated 01.06.2004 and have yet to be entered in the records. However, on contact with the officers searching the premises of M/s.Aanchal Polypack, it was found that no Bill/Challan dated 01.06.2004 corresponding to the said 35 rolls stand issued by the said manufacturing unit. Accordingly, on a reasonable belief that these 35 rolls of packaging material have also been cleared clandestinely by the manufacturer M/s.Aanchal Polypack, the same were seized by the officers.
6 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB] Further the stock-taking in the said premises of M/s.HMC revealed shortages of certain number of pouches of Gutkha involving duty of Rs.26,203/-, which the appellant accepted and debited the duty from their PLA. Further shortages in the pouches of Gutkha bearing MRP of Rs.1/- totaling valued at Rs.3,00,000/- was also detected by the visiting officers. As the appellant could not explain the reasons for such shortages, Revenue entertained a view that the same has been cleared by the said assessee, in a clandestine manner. The officers also recovered and seized one CPU from the first and second floor of the premises which were being used as residential cum office premises of Shri Hari Ram Gupta, father of Shri Ashok Gupta. The officers also recovered Indian currency of Rs.4,00,000/- from the premises of M/s.Aanchal Polypack, by believing the same to be sale prceeds of clandestinely removed goods. Subsequently the said M/s.Aanchal Polypack vide their letter dated 17.06.2004 submitted copies of the balance sheets of M/s.RD Enterprises indicating the available balance as on 31.05.2004 to the extent of Rs.4,00,559/-. Shri R.D.Agarwal is the proprietor of the said firm M/s.R.D. Enterprises and Smt. Vineeta Agarwar was the proprietor of M/s.Aanchal Polypacks. However, the Revenue entertained a view that inasmuch as no explanation was given either by Smt.Vineeta Agarwal, proprietor of M/sAanchal Polypack or Shri R.D.Agarwal of M/s.R.D.Enterprises who was present on the spot, the said explanation has to be treated as an after-thought.
4. In view of the foregoing, proceedings were initiated against the appellants proposing confiscation of the seized materials and to confirm the duty of Rs.59,400/- in respect of the same. The notice also proposed confiscation of the vehicle carrying the said 22 bags without payment of 7 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] duty. Along with the above proposals, the notice proposed to confiscate the Indian currency of Rs.4.00 Lalkhs recovered from the premises of M/s.Aanchal Polypack and to impose penalties upon the various noticees. The said show cause notice stands confirmed by the Order-in- Original No. 01/Commissioner/LKO/CX/2009 Dt. 27/01/2009 by the Commissioner vide which he ordered for confiscation of the various materials seized initially with an option to the assessee to redeem the same on payment of redemption fine. Duties also stand confirmed along with imposition of penalties. The Indian currency of Rs.4.00 Lakhs also stand confiscated. Appeal No.E/1815/2009-EX[DB], E/1816/2009- EX[DB], E/1850/2009-EX[DB], E/2082/2009-EX[DB] stand filed against the said order of the Commissioner.
5. In the above background further investigations were taken up by the Revenue. During the further investigations, statements of various persons including the appellants' buyers and the representative of the transporter agency were recorded. Shri Indra Bahadur Singh, Booking Clerk, working in transport agency M/s.Lucknow Tulsipur Forwarding Agency deposed that even though description of the goods on the G.R./Challanas issued by their agency was Zarda, but actually 'Gomti' brand Gutkha was booked by one Shri Yadav. Statements of consignment agents of the transporter Shri Madan Pal Singh and Nashir Ahmed, who were handling the goods booked by M/s.Lucknow Tulsipur Forwarding Agency, Lucknow were also recorded deposing thereby that 'Gomti' Gutkha was transported in the guise of Zarda. Further three main buyers of 'Gomti' Gutkha, Shri Kedar Nath Gupta of Kerana Gupta Store, Colonelganj, Shri Anand Kr. Of M/s.Chowdhury Dinanath & Sons, Gonda and Shri Munsilal of M/s.Roshan Traders, Balarampur, also stated 8 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] in their statements recorded during the course of investigation that the goods received under GRs/Bilties were only Gutkha. Statements of some of the buyers indicated receipt of the 'Gomti' brand Gutkha without payment of duty and against cash.
6. Based upon the said set of evidences collected during the investigations, Revenue entertained a view that M/s.SC as also M/s SFF was also indulging in clandestine activities and have cleared the Gutkha without payment of duty. Accordingly they were issued a show cause notice dated 06.03.2006 alleging clandestine manufacture and removal of Gutkha by both the said manufacturing units i.e. M/s.Shimla Food and Flavours as also to M/s.Shimla Chemicals. Accordingly, notice proposed the confirmation of demands against the said two manufacturing units along with imposition of penalties on the various noticees. The said show cause notice culminated into impugned Order-in-Original No. 02/Commissioner/LKO/CX/2009 Dt. 30/01/2009 vide which he confirmed the demand of duty of Rs.45,00,900/- against M/s.Shimla Food and Flavours along with confirmation of interest and imposition of identical amount of penalty upon them. The adjudicating authority also confirmed the demand of Rs.26,203/- in respect of the shortages of the final product found in the premises of the said appellants along with imposition of penalty. Further duty of Rs.72,76,500.00 (Rupees Seventy Two Lakh Seventy Six thousand Five Hundred only) was confirmed against M/s.Shimla Chemicals along with confirmation of interest and imposition of penalty of identical amount under section 11AC of the Act read with Rule 25 of the Central Excise Rules. Further penalties stand imposed upon Shri Rajesh Kr.Gupta, Proprietor of M/s.Himachal Marketing Company, M/s.Shimla Products, Shri Ashok Kr. Gupta, partner 9 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] of M/s.Shimla Food and Flavours, Shri Anil Kr. Gupta, Partner of M/s.Shimla Chemicals and M/s.Aanchal polypack, to the extent of Rs.1,18,03,603/- each in terms of the provisions of Rule 25/26 of the Central Excise Rules. The Appeal Nos.E/1289/2009-EX[DB], E/1290/2009-EX[DB], E/1004/2009-EX[DB], E/1291/2009-EX[DB], E/1292/2009-EX[DB], E/1293/2009-EX[DB], E/1317/2009-EX[DB] stand filed by the appellants against the said order. As the two sets of appeals arises from two different orders, one relating to seizure part and the other relating to demands of duties alleging clandestine activities, we proceed to decide the two sets of appeals as under.
O-I-O No.01/Commissioner/LKO/CX/2009
7. Shri S.K.Pandey, learned Advocate, Shri A.P.Mathur, learned Advocate & Shri Amit Awasthi, learned Advocate appearing for the Appellants have contested the impugned orders on number of grounds. It is the contention of the learned Advocate Shri S.K.Pandey that the impugned orders are factually incorrect inasmuch as in the seizure case the adjudicating authority has confirmed the demand of duty in respect of the 22 bags found loaded in the pick up van, which was located outside the premises of M/s.Himachal Marketing Company. Admittedly the said unit is not the manufacturing unit. In fact the goods manufactured by M/s.SFF are being cleared to the said M/s.Himachal Marketing Company, who are further selling the same to various customers. He has drawn our attention to the Panchnama drawn by the officers, which shows that the said van was intercepted, when the same was parked outside the premises of M/s.HMC AT 23, Datia House. As per 10 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] the statement of Shri Rajesh Kr.Gupta, proprietor of HMC the aforesaid bags were loaded in the van on 30.05.2004 and the vehicle belongs to him. The said 22 bags were out of the production, which was cleared by SFF on the last evening only i.e. on 31.05.2004 under invoice No.153 and the same was found entered both in the records of the SF as well as HMC by the visiting officers. In such a scenario confirmation of demand of duty in respect of the said bags along with option given to M/s.SFF to redeem the said goods on payment of redemption fine is not justified.
8. We find that the Commissioner vide his Order-in-Original No. 01/Commissioner/LKO/CX/2009 Dt. 27/01/2009 has demanded a duty from M/s.SFF as also has confiscated the said 22 bags found loaded in the van with an option to M/s.SFF to redeem the same on payment of redemption fine. Inasmuch as admittedly the said goods along with the vehicle belongs to HMC, as reflected in the Panchnama as also in the statement of Shri Rajesh Kr.Gupta, the confirmation of demand against M/s.SFF is not justified. The Revenue has neither alleged in the SCN nor shown any evidence that the said 22 bags were loaded by M/s.SFF in the said van and the same were cleared from the factory of M/s.SFF without payment of duty. In these circumstances, we fully agree that the confirmation of demand of around Rs.30 thousand and confiscation of the same is required to be set aside along with setting aside the confiscation of the Mahindra Pick Up van.
As regards the confiscation of the sale proceeds of Rs.4.00 Lakhs recovered from the premises of M/s.Aanchal Polypack, we find that apart from the fact that the said noticee has advanced sufficient reasons to show that the amount in question was the balance available in their balance sheet account, the Revenue has not advanced any 11 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] evidence to show the said Indian currency to be the sale proceeds of clandestinely removed goods. It is well settled law that onus to prove the Indian currency to be the sale proceeds of clandestine activities lies very heavily on the Revenue and is required to be discharged by production of sufficient evidence. In the present case there is nothing on record to substantiate the Revenue's allegations of the currency being the sale proceeds. As such we find no justification for confiscation of the same. Accordingly, the confiscation of the same is set aside.
As regards the confiscation of 416.017 kgs. of printed laminated pouches with an option to M/s.Aanchal Polypack to redeem the same on payment of redemption fine of Rs.58,242.00, we find that during the relevant period, the said appellant was working under small scale exemption as also in terms of the Hon'ble Supreme Court decision in the case of M/s Metlex (I) Pvt. Ltd. V/s Commissioner of Central Excise, New Delhi reported as 2004 (165) E.L.T. 129 (S.C.) the activity of lamination does not amount to manufacture and as such M/s Aanchal Polypack was not clearing their goods on payment of duty. In these circumstances, it cannot be said that they cleared their goods in a clandestine manner, in the absence of any duty liability upon them there was no duty liability against the said appellant, thus justifying confiscation of the said goods. The same is accordingly set aside.
9. As regards imposition of penalties on M/s.Shimla Food & Flavours as also on Shri Rajesh Kr. Gupta of M/s.Himachal Marketing Company or M/s.Aanchal Polypack as also on Shri Ashoki Kr. Gupta having held that there is no clandestine activities on the part of the assessee, we set aside the penalties imposed upon them.
12 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB]
10. In nutshell the impugned Order-in-Original No. 01/Commissioner/LKO/CX/2009 Dt. 27/01/2009 is set aside and all the appeals are allowed with consequential relief to the appellants.
O-In-O No.02/Commissioner/LKO/CX/2009
11. On going through the impugned orders as also the submissions made by the Advocates appearing on behalf of the appellants we find that the Revenue's case is dependent upon the fact of seizure of 22 bags from the pick up van found parked outside the premises of M/s.Himachla Marketing Company. Subsequently they made investigations and recorded the statements of the transporter and buyers etc.. The main evidence relied upon by the Revenue is the investigations made at the end of Lucknow Tulsipur Forwarding Agency and the statements of their authorized representative.
12. Vide the said impugned order, the adjudicating authority has confirmed the demand of Rs.45,27,103/- against M/s.Shimla Food & Flavours along with confirmation of interest and imposition of penalty of identical amount. In addition duty of Rs.72,76,500/- stands confirmed against M/s.Shimla Chemicals along with interest confirmation and penalty imposition of identical amount. Further penalties stand imposed upon the other notices as detailed in the preceding paragraphs.
13. Shri S.K.Pandey, learned Advocate appearing on behalf of the said appellants has submitted that the demand of duty on the findings of clandestine removal stands primarily based upon the statements dated 18.03.2004 and 12.07.2004 of one Shri Indra Bahadur Singh, booking clerk of the transporter company. He submits that admittedly the 13 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] description on the GRs/Challans was Zarda, but the said deponent has deposed in his statement that the goods actually transported were 'Gomti' brand Gutkha which were booked by one Shri Yadav. The adjudicating authority has also relied upon statement of the out-station agents and buyers for concluding that the goods described as Zarda in GRs/Challans was not Zarda, but was Gutkha, which has been manufactured by the said two manufacturers. He submits that no reliance can be placed on the said statement of Shri Indra Bahadur Singh, inasmuch has he was never offered for cross-examination, neither the other deponents were cross-examined during the course of adjudication. By referring to various decisions, he submits that denial of cross-examination amounts to violation of principles of natural justice and the reliance on the said uncorroborated and unexamined statements cannot be justifiably done. He submits that the said statement of Shri Indra Bahadur Singh is based upon the version of Shri Yadav, who used to bring the goods to the transporters for booking the same. As such even the version of Shri Indra Bahadur Singh is based upon hearsay evidence and not on his personal knowledge. He submits that inasmuch as the goods were sent to the said transporters in a packed condition, the statement of Shri Indra Bahadur Singh to the effect that the goods booked were Gutkha and not Zarda cannot be appreciated inasmuch as he would not be knowing the contents of the packets, which were not opened by him. Shri Panday, learned Advocate further submits that HMC was also trading in tobacco and was buying the goods locally from the other traders and were booking the same. Further some of the buyers in their statements have submitted that they were purchasing the goods from HMC and were themselves booking the same for transportation 14 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] through the transport agency. As such the findings of the adjudicating authority that all the goods transported through M/s.Lucknow Tulsipur Forwarding Agency are goods which have been manufactured by M/s.Shimla Chemicals and M/s.SFF cannot be appreciated in the absence of any other evidence on record.
Learned Advocate further submits that the reference to the statement of Shri Sunil Kr. Sahu, who is a Supari broker, to support the Revenue's stand that they had been purchasing the raw materials in a clandestine manner, cannot be appreciated. Clarifying further he submits that Shri Sahu in his statement has stated that Supari was supplied by him to SC and SFF in cash. Further Shri Santosh Kr.Trivedi, who was looking after the day to day work of Shimla Products, manufacturer of Supari had deposed that cut and dried Supari was being sent from his factory to the factory of SFF. It is the contention of the appellant that Shri Sunil Sahu, whose statement is being relied upon by the Revenue, was only a broker for supply of Supari and was not himself the seller or supplier of supari. From the document recovered from his premises, he has stated that he is unable to state as to how much quantity of Supari has been supplied to SFF/SC by him or the other persons. He had disclosed the names of Supari seller, but the Revenue has not made any further enquiry from the seller of Supari to substantiate their allegation of unaccounted purchase and transport of huge quantity of Supari of around 54 MT. The adjudicating authority has given a finding that the entire quantity shown in the documents recovered from Shri Sahu were the quantity of Tobacco and Supari which must have been supplied to SFF and SC. The said finding of the 15 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] adjudicating authority is entirely based upon assumptions and presumptions.
He further submits that Shri Ashok Kr.Gupta, partner of SFF in his statement dated 17.11.2004 has stated that Supari has been purchased from M/s.Rajesh & Co. and M/s.Ram Kr. Ajay Kr. and Shri Sunil Kr. Sahu, who was only a broker of the Supari which was never directly purchased from Shri Sunil Kr.Sahu, who is only a broker and not seller of Supari. He submits that at times Supari was purchased through him for which he was getting commission from the seller of the Supari and payments for the same were being made to the seller of the Supari directly and not to Shri Sunil Kr. Sahu. As such his statement that he had sold Supari to the said two manufacturing units cannot be relied upon in view of the clear fact that he was only a broker and not seller of Supari.
Further the adjudicating authority has upheld the allegations that during the period August, 2003 to January, 2004 Shimla Chemicals has procured unaccounted Supari from Shimla Products. The said allegation is made only on the basis of statement of Shri Santosh Kr.Trivedi, an employee of Shimla Products. According to the said statement some quantity of Supari was dispatched to Shimla Chemicals and rest was used for manufacture of sweet Supari. There is no quantification given by Shri Trivedi as regards the quantity of Supari supplied to SFF and SC. There is also no evidence of transport of Supari by Shimla Products to the factory of SFF and SC and as such reliance by the adjudicating authority on the uncorroborated statement of employee of M/s.Shimla Products is neither justified nor in accordance with the settled law. 16 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB]
14. Shri Pandey, learned Advocate further submits that the Revenue has alleged removal of 3,92,13,000 pouches of 'Gomti' Gutkha, without payment of duty. The appellants have already shown the manufacture of 2,57,34,555 pouches of Gutkha has having been manufactured and cleared on payment of duty during the period in question. He submits that the manufacture of Gutkha to the tune of 70.58 MT as alleged by the Revenue required 52,937 kgs. of Supari, 4,235 kgs. of Tobacco, 5646 kgs. of Mulaithi and small quantities of lime, paper mint, elachi, perfume (compound) and powder weighing 24.70 kgs.. Besides the above raw materials, the printed packing material for the pouches and the packets is also required. Revenue apart from alleging receipt of Supari has not advanced any evidence to show the receipt of the other raw materials required for the manufacture of such a huge quantity of their final product. Even though the appellant had provided the names of the suppliers of all the raw materials, but no enquiry was conducted from the said suppliers and merely based upon the statement of the broker for supply of Supari, which is only one of the raw materials, the allegations of clandestine removal stand upheld against them. Even Shri Sunil Kr.Sahu, in his statement has given the names of the suppliers of the Supari, but Revenue has not gone ahead and investigated the matter at the end of the said Supari suppliers. In this scenario it is the contention of the appellant that allegations of clandestine removal cannot be upheld against them.
15. Learned Advocate further contends that there is virtually no evidences of manufacture and removal of such a huge quantity of Gutkha either from the factory of SFF or SC either to M/s.HMC or to any other buyer without payment of duty. Shri Ashok Kr. Gupta, partner of 17 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] SFF has not admitted that Gutkha was cleared by them without payment of duty. Further even Shri Rajesh Kumar Gupta, who is the owner of 'Gomti' brand Gutkha and is the sole buyer of Gutkha manufactured by SFF and SC has nowhere admitted that he purchased non-duty paid Gutkha in cash from SFF or SC. He submits that the said two manufacturers never booked any goods at the transport agency neither sold any goods to out-station buyers. As such the statement of various representative of the transport agency or the statements of the buyers do not reflect the correct position. By drawing out attention to the outcome of the search of various premises of the buyers he submits that the same were selling many brands of Gutkha including tobacco and in some of the cases no difference in stock was found. Further the statements of the buyers will not lead to inevitable conclusion that the Gutkha found at the said buyer's premises were cleared clandestinely by the said two manufacturers. He also submits that neither the sale records of HMC were scrutinized or adduced in the show cause notice to support the department's claim to the effect that the impugned goods were sold in excess of the purchases made by HMC from SFF or SC. He submits that as per the settled law the onus to prove clandestine activities of the manufacturers is on the Revenue and is required to be discharged by tangible, cogent evidences of removal and such findings of clandestine removal cannot be upheld on the basis of the third party records or the statements, there being no corroborative evidences. For the above proposition he has relied upon various decisions of the Tribunal as detailed below:-
(1) Grauer & Weil (India) Ltd. v. CCE, Meerut [2000 (116) E.L.T. 618 (T)] (2) Vigirom Chem Pvt.Ltd. v. CCE, Bangalore [2010 (251) E.L.T. 544 (T-Bang.] 18 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB] (3) CCE V. Brims Products [2011 (271) E.L.T. 184 (Pat.)] (4) CCE, Lucknow v. Sigma Castings Ltd.
[2012 (282) E.L.T. 414 (Tri.-Del.)] (5) Mahesh Silk Mills v. CCE, Mumbai [2014 (304) E.L.T. 703 (Tri.-AHMCd.)] (6) Arya Fibres Pvt.Ltd. v. CCE, AHMCedabad-II [2014 (311) E.L.T. (Tri.-AHMCd.)] (7) Gupta Synthetics Ltd. v. CCE, AHMCd-II [2014 (314) E.L.T. 225 (T-AHMCd.)] (8) Suzuki Synthetics v. CCE, AHMCd.-II [2015 (318) E.L.T. 487 (T.-AHMCd.)] (9) CCE, Raipur v. P.D.Industries Pvt.Ltd.
[2016 (340) E.L.T. 249 (Tri.-Del.)] (10)CCE, Delhi-III v. Jayshin Ltd.
[2016 (344) E.L.T. 599 (Tri.-Chan.)]
16. Shri A.P. Mathur appearing on behalf of the M/s Aanchal Polypack submitted that penalty imposition on them on the ground that they have cleared the laminated plastic rolls without payment of duty is not justified inasmuch as there is no legal obligation upon them to pay duty. In terms of the Order of the Hon'ble Supreme Court in the case of M/s Metlex (I) Pvt. Ltd. V/s Commissioner of Central Excise, New Delhi reported as 2004 (165) E.L.T. 129 (S.C.), the activity undertaken by the said appellant was not dutiable inasmuch as no manufacture was involved. As such submits the learned advocate that the allegations of clearance without payment of duty by the said appellant cannot be upheld.
Shri Amit Awasthi, learned Advocate appearing on behalf of the various buyers submits that imposition of penalty upon them as also confiscation of goods seized from their premises are not justified in the absence of any evidences to show that the said receipt of goods by the buyers were without payment of any duty, cleared by the manufacturers. They have purchased the goods from the traders M/s H.M. and as such there was no justification for imposition of penalties upon them.
19 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB]
17. Shri Rajeev Ranjan, learned Addl.Commr.(A.R.) appearing for the Revenue has reiterated the reasoning of the adjudicating authority and has drawn our attention to his findings. It stands submitted that the transporters' representative has in unequivocal terms deposed that the Gutkha was being booked through them under the guise of Zarda. This fact read with the statements of various buyers lead to the inevitable conclusion that the appellant was clearing their product without payment of duty. He also submits that the fact of interception of the vehicle found loaded with 22 bags of Gutkha further strengthens the Revenue's case. Accordingly he prays for upholding the impugn4ed orders and rejecting the appeals.
18. After carefully considering the submissions made by both the sides, we find that as per undisputed facts on record, 'Gomti' brand Gutkha was owned by M/s.HMC which is a proprietory unit of one Shri Rajesh Kr.Gupta. The said owner of the brand name was getting the goods manufactured from Shimla Food and Flavours as also from Shimla Chemicals and was buying their entire production himself. He was further selling the goods to various customers either directly from their premises, in which case the customers were booking the goods through the transporters on their own or the said goods were being booked by M/s.HMC through M/s.Lucknow Tulsipur Forwarding Agency for which various GRs/Challans were being issued by the said agency. Shri Indra Bahadur Singh, Booking Clerk of said transport agency, in his statement deposed that the goods booked through them were actually Gutkha whereas Zarda was being shown in the GRs/Challans. However, the said deponent has nowhere disclosed as to how he was aware of the fact that the goods transported through them were Gutkha and not Zarda. 20 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB] Admittedly the goods being transported were duly packed and there was no occasion for the said Shri Indra Bahadur Singh to open the bags and to find out the exact nature or description of the goods. However, he has stated that Gutkha was being received from the appellants through one Shri Yadav who brought the goods to the transport agency and as per the information given by Shri Yadav, the goods were Gutkha. The said version of Shri Indra Bahadur Singh is based upon the information given to him by Shri Yadav, which is nothing but a hearsay evidence. The said fact, will not lead to the inevitable conclusion that the goods being transported through the said agency were Gutkha and not Zarda, which was being written in the GRs/invoices. Further, we also note that such bookings at the Transport Agency were being done by M/s HMC and not by SC or SFF. As such, even if the statement of Shri Indra Bahadhur Singh is accepted to be true, the same would relate to M/s HMC, who was not the manufacturer of Gutka and can no way reflect upon the clearances from SC or SFF.
19. The Revenue has further relied upon the statements of some of the buyers and the discrepancy of the stock at their premises found as a result of searches. However, as we have earlier observed that the entire production manufactured by the appellant was being sold by them to M/s.HMC who was doing trading in various products including the tobacco and Zarda. Though it is well settled law that the statements of the third parties cannot be made the basis for arriving at the conclusion of clandestine removal, without corroborative evidence, but even if presuming that the said statements were correct, it is the HMC who has sold the goods in cash to the buyers. The Revenue is expected to produce evidences showing the manufacture of goods by SC and SFF 21 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] and its further clearances to HMC in a clandestine manner. The evidences collected by the Revenue reflected upon the clearances made by HMC to their customers and nowhere deals with the clearances from SFF and SC to their customers or to M/s.HMC. M/s HMC sells the goods in the market and the sale of the same in cash by HMC can be from the duty paid stock received by him from SFF and SC. In the absence of any allegation even in the show cause notice that SFF/SC has ever booked any goods directly through Lucknow Tulsipur Forwarding Agency or even sold goods directly to customers it has to be held that the entire case of the Revenue is based upon assumptions and presumptions.
20. It is further seen that the Revenue has made out its case based upon the statement of the various persons including the statement of various representatives of the transport agency, the statement of the commission agent for sale of Supari and statement of buyers etc. The appellants had made a request for cross-examining the deponent of the said statement which has not be granted by the Adjudicating Authority. Though some of the statement stand retracted by the deponents but the same had been relied upon by the Adjudicating Authority.
The Hon'ble Allahabad High Court in the case of Commissioner of Central Excise V/s Parmarth Iron Pvt. Ltd. reported as 2010 (260) E.L.T. 514 (All.) has observed that the statements recorded during the course of investigation are required to meet the requirements of Section 9D of the Central Excise Act. If the said statement have not been tested on the tool of cross-examination, the same cannot be taken in consideration and have to be kept out of the realm of evidence. Not only that the Hon'ble Punjab & Haryana High Court in the case of M/s Jindal drugs Pvt Ltd. V/s Union of India reported as 2016 (340) E.L.T. 67 (P & 22 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] H) as also in the case of M/s Ambika International V/s Union of India reported as 2018 (361) E.L.T. 90 (P & H) has held that not only cross- examination but examination-in-chief is also required to be undertaken during adjudication. The Hon'ble Chhattisgarh High Court in the case of M/s Hi Tech Abravasives Ltd. V/s CCE & CUS, Raipur reported as 2018 (362) E.L.T. 961 (Chhattisgarh) has observed that statement recorded during search and seizer are relevant only when person who gave such statements are examined and an opinion is formed that the same should be admitted. It was further observed that mere recording of statement is not only enough but it has to be fully conscious application of mind by the Adjudication Authority that the statement is required to be admitted in the interest of justice. If the said statement have not been tested, they have to be kept out of conscience. So the same effect is the decision of the Hon'ble High Court of Delhi in the case of Felvel International V/s Commissioner of Central Excise reported as 2016 (332) ELT 416 (Del.) vide which the minority view of the Tribunal was upheld by setting aside the majority view.
By applying the ratio of above decisions to the facts of the present case, we note that the entire case of the Revenue is based on uncorroborated, untested, unexamined and in some case retracted statement which do not inspire confidence in the same. As such the said statements have to be kept out of consideration and cannot be considered to be relevant evidence. If the same are ignored nothing remains as evident to substantiate the Revenue's allegation of clandestine removal.
21. We also find that the Revenue has not scrutinized the sale purchase of HMC and there is no evidence on record to show that the 23 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] sales of HMC were in excess than the purchases made by them. It is well settled law that the allegations of clandestine removal are required to be established by the Revenue based upon the tangible and positive evidences and the same cannot be upheld on the basis of assumptions and presumptions. We note that the entire case of the Revenue is based upon the doubts entertained by them and there is virtually no evidence on record to indicate the clandestine activities of the two manufacturers..
22. We also find favour with the said manufacturer's plea that for manufacture of Gutkha various raw materials are required. The Revenue has only referred to uncorroborated statement of one Shri Sahu, who was a dealer in Supari and statement of one Shri Tripathi to upheld that the appellant had procured excess Supari which was not being reflected by them in their records. Apart from the fact that the said statements have not been tested by the tool of cross-examination and are in the nature of a third party statements and cannot be solely relied upon, we note that the Revenue has not advanced any evidence for procurement of the other raw materials. Admittedly manufacture of Gutkha involves and requires number of raw materials and in the absence of any allegation of procurement of excess raw materials of all the varieties, mere reference to Supari procurements by itself would not be sufficient to uphold the findings of clandestine removal.
23. Though the legal issue that clandestine removal is to be arrived at on the basis of positive evidences and the Revenue is under an onus to produce sufficient evidences or the evidences to the extent which would inspire confidence in the Revenue's allegations or would show at least preponderance of probabilities are well settled by catena of judgments. 24 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB] We take note of the recent decision of this Bench in the case of Kurele Fragrances Pvt.Ltd. and Others v. Commissioner of Central Excise, Kanpur vide Final Order No.70730-70734/2017 dated 24.07.2017. Vide the said order the Tribunal dealt with an identical evidences of the GRs and Challans issued by the transporter read with the statements of various persons, observed that the GRs/Bilties issued by the transporter leading the Revenue to believe that the same were in respect of clandestine activities of clearance of Gutkha, when there was no such mention in the GRs, would be in the nature of assumptions and presumptions. The said order of the Tribunal was appealed against by the Revenue before the Hon'ble High Court of Allahabad, who vide their order dated 05.02.2019 in Central Excise Appeal No.24 of 2008 rejected the same by observing as under:-
"We have perused the record. It shows that the entire show cause notice has been based on bilties/GRs claimed to have been recovered from M/s Vinod Forwarding Agency, Kanpur. It further reveals that the goods transported by M/s Vinod Forwarding Agency, name of the manufacturer, have not been stated on the alleged GRs and its brand name and it was only presumed by the Revenue that wherever no names/brands were mention of Rajshree ( Brand name, M/s K.P. Pan Flavours) is established, the said bilties/GRs should be treated as if the said goods were booked by the respondent-assessee. The record further reveals that the statements of various persons were recorded under duress and all the submissions made therein were retracted by the witnesses and during the cross examination they had also stated that the statements were recorded under pressure by the officers. The Tribunal being the last court has also recorded findings of fact that the bilties/GRs which were recovered from M/s Vinod 25 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] Forwarding Agency in the year 2004 and were lying with the Revenue and same were used for issuing the show cause notice in the present proceedings. The Tribunal after perusal of the records and materials available has recorded findings of fact that the Revenue were using GRs repeatedly for framing charges against various assessees of manufacturers of Gutkha without connecting the GRs with the goods manufactured by the particular assessee on the basis of particulars of goods stated in the GRs. It was also noticed by the Tribunal in the impugned order that there was no investigation conducted about procurement of raw material of allegedly clandestinely cleared goods. The Tribunal has also come to the conclusion that there is no question of clandestine removal of goods without payment of duty. Moreover the bilties/GRs which were recovered from the transporter, M/s Vinod Forwarding Agency and were lying with the Revenue were being used for issuing show cause notice without conducting any investigation. In view of the aforesaid finding of facts recorded by the Tribunal we do not find any infirmity in the impugned order.
The present appeal lacks merit and is hereby dismissed. The questions of law are answered accordingly in favour of the respondent assessee and against the Department"
We find that the evidences available in the present case as also in the said decision of the Tribunal in the case of Kurele Fragrances Pvt. Ltd. are of the same nature and as such the ratio of the law declared in the above decision of the Tribunal, upheld by Hon'ble High Court is squarely applicable to the facts of the present case.
24. At this stage we may take note of another decision of this Bench of the Tribunal in the case of Durga Trading Co. Final Order No.70721- 70726/2016 dated 08.08.2016, wherein the same transport company 26 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] M/s. Lucknow Tulsipur Forwarding Agency was involved and based upon the investigations made at their end. In the said decision, the Adjudicating Authority had himself dropped the demand of around Rs.5.18 crore, which was raised against them on the basis of transporter documents. The Commissioner in that case observed that the transporters have stated that the nature of the goods reflected in transport documents was different than the goods actually being transported. The Adjudicating Authority observed that most of the transporters have stated that the consignment was never opened then how it is possible to conclude that whatever product carrying in the consignment was not the product as reflected in the transport documents. The said order of the Commissioner was appealed against by the Revenue and the Tribunal vide above referred decision rejected the Revenue's appeal. It may be noted that transport company in the case of M/s Durga Trading as also in the present case is the same i.e. M/s Lucknow Tulsipur Forwarding Agency and an identical statement recorded from their the Authorized Representatives of the said transport agency was relied upon by the Revenue in that case. As such the ratio of the said decision is squarely applicable to the facts of the present case.
25. At this stage, we may also refer to another Tribunal's decision in the case of M/s Arya Fibers P. Ltd. V/s Commissioner, Central Excise, Ahmedabad reported as 2014 311 E.L.T. 529 (Tribunal Ahemdabad-II) wherein while dealing with the issue of clandestine removal, the Tribunal laid down certain fundamental criteria's which should be established by the Revenue. For better appreciation of the same, we reproduced the relevant paragraphs of the said decision:-
"40. After having very carefully considerd the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submission made 27 APPEAL No.E/1815,1816,1850,2082,1004, 1289,1290,1291,1292,1293,1317/2009-EX[DB] before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following :
(i) There should be tangible evidences of clandestine manufacture and clearance and nor merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of:
(a) raw materials, in excess of that contained as per the statutory records;
(b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty;
(c) discovery of such finished goods outside the factory;
(d) instances of sale of such goods to identified parties;
(e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;
(f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;
(g) statement of buyers with some details of lillicit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty;
(i) links between the documents recovered during the search and activities being carried on in the factory of production; etc."
While examining the evidences in the present case from the above broad category laid down by the Tribunal, we note that there is virtually no evidence on record to show that the two manufacturing units M/s Shimla Chemicals & M/s SFF were clearing their goods in a clandestine manner. As already observed the entire case of the Revenue is based upon the statement and if the same are not taken into consideration no other evidence is available on record. The evidence produced by the Revenue do not establish their case even on the principle of preponderance of probability. It may be observed that the demand stand confirmed against manufacturing units, who were clearing their entire production to M/s HMC, whereas, the evidences collected by the Revenue, which in any case were not admissible, indicate, removals made by M/s HMC. In the absence of in-depth study of the total quantum purchased by M/s HMC and sale of the same to its customers the allegation and findings arrived at by the Adjudicating Authority have to be held as in the realm of surmises and conjecture. The same does not even lead to the doubt of clandestine clearance much less to be considered as established clandestine clearances. 28 APPEAL No.E/1815,1816,1850,2082,1004,
1289,1290,1291,1292,1293,1317/2009-EX[DB]
26. In view of the forgoing discussion, we hold that the demand of duty against the two manufacturing units or imposition of penalty upon them as also on the other appellants are unsustainable. In a nut shell all the appeals arising out of the two Impugned Orders being Order-in- Original No.01/Commissioner/LKO/CX/2009 dated 27/01/2009 & Order- in-Original No.02/Commissioner/LKO/CX/2009 dated 30/01/2009 are allowed by setting aside the said orders.
(Pronounced in open Court on 01.03.2019)
Sd/- Sd/-
(Anil G. Shakkarwar) (Archana Wadhwa)
Member (Technical) Member (Judicial)
Sm/Nihal