Custom, Excise & Service Tax Tribunal
J.D. Ispat Pvt. Ltd. vs - on 28 February, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Excise Appeal No. 1463 of 2012
(Arising out of Order-in-Original No. 21/2012/C dated 27.03.2012 passed by
the Commissioner of Central Excise & Customs, Nagpur)
M/s. J.D. Ispat Pvt. Ltd. Appellant
1428, Deshpande Layout,
Near Wardhman Nagar,
Nagpur 440 008.
Vs.
Commissioner of Central Excise, Nagpur Respondent
Telangkhedi Road, Civil Lines,
Post Box No.81, Nagpur 440 001.
WITH
Excise Appeal No. 1464 of 2012
(Arising out of Order-in-Original No. 21/2012/C dated 27.03.2012 passed by
the Commissioner of Central Excise & Customs, Nagpur)
Shivkumar Jairamdas Goel Appellant
Director of J.D. Ispat Pvt. Ltd.,
1428, Deshpande Layout,
Near Wardhman Nagar,
Nagpur 440 008.
Vs.
Commissioner of Central Excise, Nagpur Respondent
Telangkhedi Road, Civil Lines,
Post Box No.81, Nagpur 440 001.
Appearance:
Shri Prithviraj Choudhary, Advocate, for the Appellant
Shri Sunil Kumar Katiyar, Assistant Commissioner, Authorised
Representative for the Respondent
CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
Date of Hearing: 28.02.2023
Date of Decision: 28.02.2023
FINAL ORDER NO. 85770-85771/2023
PER: SANJIV SRIVASTAVA
This appeal is directed against Order-in-Original No.
21/2012/C dated 27.03.2012 passed by the Commissioner of
2 E/1463,1464/2012
Central Excise & Customs, Nagpur. By the impugned order,
following has been held:-
"ORDER
(a) I confirm the demand and order recovery of Central Excise
duty amounting to Rs. 4,47,597/- (BED Rs. 4,34,563/- + Edu.
Cess Rs. 8,690/- & SHEC Rs. 4,344/-) in respect of 116 MT of
Sponge Iron and 209 MT of MS Ingots/Runners & Risers totally
valued at Rs. 54,32,047/- found short than the recorded balance
in the factory premises on 03.10.2009 from Noticee No. 1, by
invoking extended period of 5 years under proviso to Section
11A (1) of the Central Excise Act, 1944 and order for
appropriation of the Central Excise duty of Rs. 4,47,597/-
already paid by Noticee No. 1. only
(b) I confirm the demand and order recovery of Central Excise
duty amounting to Rs. 15.82,777 (BED Rs. 15,36,676/- + Edu.
Cess Rs. 30,734/- & SHEC Rs. 15,367/-) in respect of
clandestine removal of 891.045 MT of MS Ingots valued at Rs.
1,92,08,456/- from Noticee No. 1 under Section 11A of the
Central Excise Act, 1944, by invoking extended period of 5 years
under proviso to Section 11A (1) of the said Act and order for
appropriation of Rs. 5,00,000/- paid vide GAR-7 Challan
30.11.2009 as duty liability in the ongoing enquiry/investigation
by Noticee No. 1.
(c) I confirm the demand and order recovery of Central Excise
duty amounting to Rs. 8,03,721/- (BED Rs. 7,80,312/- + Edu.
Cess Rs. 15,604/- & SHEC Rs. 7,805/-) in respect of clandestine
removal of 364.620 MT of MS Ingots, valued at Rs. 84,00,2471-
on parallel set of invoices by invoking extended period of 5 years
under proviso to Section 11A (1) of the Central Excise Act, 1944.
(d) I confirm the demand and order recovery of Central Excise
duty amounting to Rs. 20,60,269/- (BED Rs. 20,00,262/- + Edu.
Cess Rs. 40,005/- & SHEC Rs. 20,002/-) in respect of
clandestine removal of 802.580 MT of MS Ingots, valued at Rs.
1,94,16,701/- on Lorry Receipt only, without cover of invoices by
3 E/1463,1464/2012
Noticee No. 1, by invoking extended period of 5 years under
proviso to Section 11A (1) of the Central Excise Act, 1944.
(e) I confirm the demand and order recovery of Central Excise
duty amounting to Rs. 30,305/-(Rs. 29,423/- BED + Rs. 588/-
Ed. Cess+ Rs. 294/- H. Ed. Cess) in respect of clandestine
clearance of 8.65 MT of M. S. Ingots valued at Rs. 2,10,164/- as
evidenced from Lorry Receipt No. 2269 dated 21.11.2008 of M/s.
Nagpur Chandrapur Roadlines, Nagpur by invoking extended
period of 5 years under proviso to Section 11A (1) of the Central
Excise Act, 1944.
(f) I confirm the demand and order recovery of Central Excise
duty amounting to Rs. 20,27,261/- (Rs. 19,98,214/- BED + Rs.
39,365/- Ed. Cess+ Rs. 19,682/- SHEC) in respect of clandestine
clearance of 617.540 MT of M. S. Ingots valued at Rs.
1,64,10,669/- as evidenced from additional submissions made
by various transporters while recording of their statements, by
invoking extended period of 5 years under proviso to Section
11A (1) of the Central Excise Act, 1944.
(g) I confirm the demand and order recovery of Central Excise
duty amounting to 34,53,211/- (BED Rs. 33.52,632/- Edu. Cess
Rs 67,053 & SHEC Ra 33,526-) in respect of clandestine removal
of 1855.420 MT of MS Ingots, valued at Re 4.19.07.897/- as
evidenced from records seized and submission made by Shri.
Azad Kumar Sharma and Shri Amit Sharma, under panchnama
and confessional statements dated 03.11.2009, by invoking
extended period of 5 years under proviso to Section 11A (1) of
the Central Excise Act, 1944.
(h) I confirm the demand and order recovery of Central Excise
duty amounting to R 2.31.12.094/- (BED Rs 2,24,38,926+ Ed.
Cess Rs.4,48,779 SIL Ed. Cess Rs. 2.24.389/-) on clandestine
clearances of 8396.447 MT M.S.Ingots during May 2008
February 2010 based on the electricity consumption from
Noticee No. 1 by invoking extended period of 5 years under
proviso to Section 11A(1) of the Central Excise Act, 1944. Since
this duty is inclusive of the duties demanded at (a) to (g) above,
4 E/1463,1464/2012
the Noticee No. 1 has already deposited Rs.9.47,597/-(Rs
9,34,563- BED Rs. 8690-Ed Cess Rs. 4344/-SH. Ed. Cess) as
mentioned at (a) and (b) above, I order for appropriation of the
duty already deposited.
(i) I confirm the demand and order recovery of Central Excise
duty amounting to Rs. 1,13,322/- (Rs. 1,11,100/- BED + Rs.
2,222/- Ed. Cess) in respect of clearance of Lifting Magnet with
control panel, without payment of duty vide Invoice No. 1 dated
08.1.2008 from Noticee No. 1, by invoking extended period of 5
years under proviso to Section 11A (1) of the said Act for
violations of provisions of Section 11D of the Central Excise Act,
1944 and appropriate the Central Excise duty of Rs. 113322- and
interest of Rs. 28,236/- paid by Noticee No. 1 for such clearance.
(j) I order recovery of the aforesaid amounts alongwith interest
at appropriate rate under Section 11 AB of Central Excise Act,
1944; from the Noticee no. 1.
(k) I impose penalty of Rs. 2,32,25,416/- (Rs Two crores thirty
two lakhs twenty five thousand four hundred and sixteen only.)
under the provisions of Section 11 AC of Central Excise Act,
1944, on the Noticee no. 1.
(l) I impose a penalty of Rs. 23,00,000/- ( Rs. Twenty Three
Lakhs only) on Shri Shivkumar Jairamdas Goel( Noticee No 2),
Director of Noticee No.1 under the provisions of Rule 26 of
Central Excise Rules 2002."
2.1 Appellant 1 is engaged in manufacture of MS ingots falling
under Chapter Heading 72, using electric induction furnace of
electrotherm make. Appellant 2 is the director of appellant 1.
2.2 The main raw materials for manufacture of the finished
products of the appellant are sponge iron, pig iron, ferro alloys,
MS crap, bazar scrap etc. using electricity. Appellant had
induction furnace of 10 MT capacity installed.
2.3 Intelligence was gathered that appellant 1 was evading
central excise duty by suppressing the production in their
5 E/1463,1464/2012
statutory records and clearing the same without payment of
central excise duty. On the basis of the said intelligence,
premises of the appellant was searched and stock verification
was done. During the course of stock verification, 325 MT
shortage was found in respect of finished goods and raw
materials. Appellant 2 who is director of appellant 1, being
unable to explain the difference in stock, admitted and
expressed his willingness to pay the duty in respect of difference
found and made payment of Rs.4,47,597/- along with interest of
Rs.4,849/- through GAR-7 challan dated 05.11.2009.
2.4 Further investigations were carried out at the transporters
end regarding clandestine clearance of MS ingots, on the basis of
Rahadari passes and other documents obtained from the Octroi
authority and Nagpur Municipal Corporation, records seized from
Shri Amit Sharma, commission agent, Nagpur and on the basis
of electricity consumption of the appellant for manufacturing MS
ingots. On the basis of the above investigations, central excise
duty short paid has been quantified in the following manner:-
Central Excise duty on the shortages detected in finished
goods/raw material during the panchnama proceedings
on 03.10.2009 at M/s. J.D. Ispat Pvt. Ltd.
Descriptio Quantit Value of Central Excise Duty payable in Rs.
n of goods y of goods in
goods Rs.
found
short
(in MT)
BED Ed. SHEC Total
Cess
Sponge 116 11,15,920/ 91,950/-
Iron -
MS 209 43,16,127/ 3,55,646
Ingots/Run - /-
ners &
Risers
Total 54,32,047/ 4,34,563/ 8690/- 4344/- 4,47,597
- - /-
6 E/1463,1464/2012
Central Excise duty on the basis of record No.15 of
Annexure A to the Panchnama dated 22.10.2009 at M/s.
Poonamchand Roadlines:- (Para 4)
Period Quantit Value of Central Excise Duty payable in Rs.
y of goods in
goods Rs.
MS
Ingots
cleared
clandes
tinely in
MT
BED Ed. SHEC Total
Cess
06.08.09 to 891.045 1,92,08,456 15,36,676 30,734 15,367 15,82,777
17.10.2009
Central Excise duty based on Parallel Invoices along with
Rahadari Passes from the Octroi Naka of Nagpur Municipal
Corporation, Nagpur. (Para 5)
Quantity Value of Central Excise Duty payable in Rs.
of goods goods in
cleared Rs.
clandestin
ely
BED Ed. SHEC Total
Cess
364.620 MT 84,00,247- 7,80,312 15,604 7,805 8,03,721/-
Central Excise duty based on Rahadari Passes collected
from Octroi Naka of Nagpur Municipal Corporation,
Nagpur (Para 6).
Quantity Value of Central Excise Duty payable in Rs.
of goods goods in
cleared Rs.
clandestin
ely
BED Ed. SHEC Total
Cess
802.580 MT 1,94,16,701 20,00,262 40,005 20,002 20,60,269/
-
Central Excise duty based on statement of Shri Deepak Thakre dated 02.11.2010 (Para 6.7.6 and 6.7.7.) 7 E/1463,1464/2012 Quantity Value of Central Excise Duty payable in Rs.
of goods goods in
cleared Rs.
clandestin
ely
BED Ed. SHEC Total
Cess
8.65 MT 2,10,164 29,423 588 294 30,305/-
Central Excise duty on the basis of additional submissions made by various transporters during the recording of their statements:- (Para 6.5, 6.7 and 6.9) Quantity Value of Central Excise Duty payable in Rs.
of goods goods in
cleared Rs.
clandestin
ely
BED Ed. SHEC Total
Cess
617.540 MT 1,64,10,669 19,68,214 39,365 19682 20,27,261
Central Excise duty based on records of Shri Amit Sharma (Para 9) Quantity Value of Central Excise Duty payable in Rs.
of goods goods in
cleared Rs.
clandestin
ely
BED Ed. SHEC Total
Cess
1855.420 4,19,07,897 33,52,632 67,053 33,526 34,53,211
MT
Central Excise duty based on electricity consumption:-
(Para 10) Month Units Produ As per Diffe Value of Central Excise Duty consume ction RG-1 rence goods in payable in Rs.
d @ MT daily /Exc Rs.
Ingots stock ess
/1046 regist prod
units er uctio
n of
Ingot
s
BED Ed.Ces S&HE
8 E/1463,1464/2012
s D
Cess
May 26162340 25011. 16615. 8396. 20437651 22438926 448779 2243
2008
797 350 447 4 89
to Feb
2010
2.5 On the basis of the above, a show cause notice dated
23/24.12.2010 was issued to appellant 1 and appellant 2 asking them to show cause as to why:-
"(a) Central Excise duty amounting to Rs. 4,47,597/- (BED Rs.
4,34,563/- + Edu. Cess Rs. 8,690/- &SHEC Rs. 4,344/-) in respect of 116 MT of Sponge Iron and 209 MT of MS Ingots/Runners & Risers totally valued at Rs. 54,32,047/- found short than the recorded balance in the factory premises on 03.10.2009 [shown at para 13(1) above] should not be demanded from Noticee No. 1 under Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act and why the Central Excise duty of Rs. 4,47,597/- paid on such shortages by Noticee No. 1 should not be appropriated.
(b) Central Excise duty amounting to Rs. 15,82,777 (BED Rs. 15,36,676/- + Edu. Cess Rs. 30,734/-&SHEC Rs. 15,367/-) in respect of clandestine removal of 891.045 MT of MS Ingots valued at Rs. 1,92,08,456/- [shown at para 13(2) above] should not be demanded and recovered from Noticee No. 1 under Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act and why Rs. 5,00,000/- paid vide GAR-7 Challan 30.11.2009 as duty liability in the ongoing enquiry/investigation by Noticee No. 1 should not be appropriated.
(c) Central Excise duty amounting to Rs. 8,03,721/- (BED Rs. 7,80,312/- + Edu. Cess Rs. 15,604/- & SHEC Rs. 7,805/-) in respect of clandestine removal of 364.620 MT of MS Ingots, valued at Rs. 84,00,247/- [shown at para 13(3) above] on parallel set of invoices by Noticee No. 1 should not be demanded and recovered from them under Section 11A of the Central 9 E/1463,1464/2012 Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act.
(d) Central Excise duty amounting to Rs. 20,60,269/ (BED Rs. 20,00,267) Edu. Cess Rs. 40,005/- & SHEC Rs. 20,002/) in respect of clandestine removal of 802.580 MT of MS Ingots, valued at Rs. 1,94,16,701/- (shown at para 13(4) above) on Lorry Receipt only, without cover of invoices by Noticee No. 1, duly evidenced by corresponding Rahadari passes collected from the Octroi Authorities, should not be demanded and recovered from them under Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act.
(e) Central Excise duty amounting to Rs. 30,305/- (Rs. 29.423/- 13ED)+ Re, 588/V4. Cess +Rs. 294/- H. Ed. Cess) in respect of clandestine clearance of 65 MT of M. 5. Ingots valued at Rs. 2,10,164/-[shown at para 13(5) above) as evidenced from Lorry Receipt No. 2269 dated 21.11.2008 of M/s. Nagpur Chandrapur Roadlines, Nagpur and statement dated 02.11.2010 of its proprietor Shri. Deepak should not be demanded and recovered from Noticee No. 1 under Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act.
(f) Central Excise duty amounting to Rs. 20,27,261/- (Rs. 19,98,214/-BED+ Rs. 39.3651- Ed. Cess+ Rs. 19,682/- SHEC) in respect of clandestine clearance of 617.540 MT of M. S. Ingots valued at Rs. 1,64,10,669/-[shown at para 13(6) above] as evidenced from additional submissions made by various transporters while recording of their statements, should not be demanded and recovered from Noticee No. 1 under Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act.
(g) Central Excise duty amounting to Rs. 34,53,211/- (BED Rs. 33,52.632/- + Edu. Cess Rs. 67,053/- & SHEC Rs. 33,526/-) in respect of clandestine removal of 1855,420 MT of MS Ingots, valued at Rs. 4,19,07,897/- [shown at para 13(7) above) as 10 E/1463,1464/2012 evidenced from records seized and submission made by Shri. Azad Kumar Sharma and Shri Amit Sharma, under panchnama and confessional statements dated 03.11.2009, should not be demanded and recovered from Noticee No. 1 under Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act.
(h) Central Excise duty amounting to Rs. 2,31,12,094/- (BED Rs.2,24,38,926/- + Ed. Cess Rs.4,48,779/-+SH. Ed. Cess Rs. 2,24,389/4) on clandestine clearances of 8396.447 MT M.S.Ingots during May 2008 to February 2010 based on the electricity consumption read with other evidences, valued at Rs. 20,43,76,514 [ shown at para 13(8) above] should not be demanded and confirmed from Noticee No. 1 under Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act. Since this duty is inclusive of the duties demanded at (a) to (g) above, the Noticee No. 1 has already deposited Rs.9,47,597/- (Rs. 9,34,563/- BED + Rs. 8690/- Ed. Cess + Rs. 4344/- SH. Ed. Cess) why the Central Excise duty amounting to Rs. 6,31,78,184/- (Rs. 2,15,04,363/- BED+ Rs. 4,40,089/- Ed. Cess + Rs. 2,20,045/- SH. Ed. Cess should not be demanded and confirmed and recovered from Noticee No. 1.
(i) Central Excise duty amounting to Rs. 1,13,322/- (Rs. 1,11,100/- BED + Rs. 2,222/- Ed. Cess) in respect of clearance of Lifting Magnet with control panel, without payment of duty vide Invoice No. 1 dated 08.1.2008 [shown at para 11 above] should not be demanded from Noticee No. 1, by invoking extended period of 5 years under proviso to Section 11A of the said Act for violations of provisions of Section 11D of the Central Excise Act, 1944 and why the Central Excise duty of Rs. 113322/- and interest of Rs. 28,236/- paid by Noticee No. 1 for such clearance should not be confirmed and appropriated.
(j) Interest at the appropriate rate on the above duty amount should not be charged and recovered from them under the provisions of Section 11 AB of Central Excise Act, 1944;
11 E/1463,1464/2012
(k) Penalty should not be imposed upon them under the provisions of Section 11 AC of contravention of various provisions of law as mentioned supra.
17. Why penalty should not be imposed upon Noticee No.2 under the provisions of Rule 26 of Central Excise Rules, 2002, for contravention of various provisions of law as mentioned supra."
2.6 This show cause notice has been adjudicated as per the impugned order. Aggrieved appellants have filed these appeals.
3.1 We have heard Shri Prithviraj Choudhary, Advocate for the appellant and Shri Sunil Kumar Katiyar, Assistant Commissioner, Authorised Representative for the Revenue.
3.2 Arguing for the appellant, learned counsel submits that:-
The adjudicating authority cannot base his findings on the statement of persons who were not brought to testify the truthfulness against the appellant.
o Andaman Timber Industries [2015 (324) ELT 641 (SC)].
The demand of duty and penalty in respect of clandestine removal of MS ingots is bad in law as the whole demand has been raised on the basis of assumption and presumption. He relies on the following decisions:
o Oudh Sugar Mills Ltd. [1978 (2) ELT J172 (SC)] o JA Naidu [1983 (13) ELT 161 (SC)] o Universal Polythene Industries [2001 (130) ELT 228 (Tri.-Kolkata)] o TGL Poshak Corporation [2002 (140) ELT 187 (Tri.-
Chennai)]
o Ghodavat Pan Masala Products Ltd. & Ors. [2004 (175)
ELT 182 (Tri.-Mum)]
o K. Rajagopalan [2002 (142) ELT 128 (Tri.-Chennai)]
o Ambica Metal Works [1990 (29) ECR]
o New India Dyeing Mill [2004 (165) ELT 316 (Tri.-Del.)]
o Sanket Food Products Pvt. Ltd. [2005 (188) ELT 107
(Tri.-Del.)]
12 E/1463,1464/2012
o Malwa Cotton Spinning Mills Ltd. [2003 (155) ELT 161
(Tri.-Del.)]
o Dhebar Steel Re-Rollers [2002 (142) ELT 194].
In relation to the aforesaid submissions reliance is placed on
Shree Sidhbali Ispat Ltd. [2017 (357) ELT 724 (Tri.-Mum)] upheld by Hon'ble Bombay High Court as reported at [2021 (376) ELT 229 (Bom.)].
Further, in respect of stock shortages he relies upon the following decisions:-
o Pure Enterprises Pvt. Ltd. [1999 (111) ELT 0407 (Tri)] o Kapadia Dyeing Bleaching and Finishing Works [2000 (124) ELT 821 (Tri)] o Parshuram Cement Ltd. [2003 (160) ELT 213 (Tri.-
Del.)] o R.A. Castings Pvt. Ltd. [2009 (237) ELT 674 (Tri.-Del.)] upheld by Hon'ble Allahabad High Court as reported in [2011 (269) ELT 337 (All) and maintained by Hon'ble Supreme Court reported at [2011 (269) ELT A108 (SC)].
Summarising his submissions on each of the demand, learned counsel submitted a chart as follows:-
Summary of Issues Sr. Sub- Amount of Details of Summary of No Paragrap Demand circumstantial submissions h of confirmed evidence Operativ (Rs.) e Portion of OIO (Page
601) 1 (a) 4,47,597 Shortage of Stock Demand admitted detected during search 13 E/1463,1464/2012 2 (c) 8,03,721 Parallel invoices These documents not recovered from admissible as evidence Octroi Department as held by the Tribunal in Shree Sidhbali Ispat Ltd. [2017 (357) ELT 724 (Tri.-Mum)] upheld by Hon'ble Bombay High Court as reported at [2021 (376) ELT 229 (Bom)]
(d) 20,60,269 Lorry receipts recovered from Octroi Department 3 (b) 15,82,777 Register recovered These documents, from Transporter statements are not admissible in evidence as cross-examination of Transporters and Commission Agents, which was specifically requested for, was denied in contravention of Hon'ble Supreme Court decision in Andaman Timber Industries [2015 (324) ELT 641 (SC)]
(e) 30,305 Lorry receipts recovered from Transporter
(f) 20,27,261 Statements of Transporters
(g) 34,53,211 Statements of Commission Agents 4 (h) 2,31,12,094 Based on Dr. No reliance can be Batra's Report placed on Dr. Batra's report as has been held in R.A. Castings Pvt.
Ltd. [2009 (237) ELT 674 (Tri.-Del.)] upheld by Hon'ble Allahabad High Court reported at [2011 (269) ELT 337 (All) and affirmed by Hon'ble Supreme Court reported at [2011 (269) ELT A108 (SC)].
3.3 Learned AR reiterates the findings recorded in the impugned order.
14 E/1463,1464/2012 4.1 We have considered the impugned order along with the submissions made in the appeals and during the course of arguments.
4.2 Interestingly in the present case Commissioner has from
(b) to (h) confirmed the demand on various accounts. However, he has merged all only in one demand that is based on the electricity and the report of Dr. Batra.
4.3 On the issue of cross examination, Commissioner has observed as follows:-
"A. Panch Witnesses and Officers who visited the factory of the noticee no. 1 on 03.10.2009- The noticee has cited the following reason for seeking cross examination of the above persons "To know about the conclusion drawn about shortage of stock without actual weighment, and other such important aspect to bring out the correct information."
i. It is observed that the panchnama was conducted on 03.10.2009 in the presence of the Noticee No. 2 i.e. Shri Shivkumar Jairamdas Goel, Director of the Noticee No.1, as well as Pancha Witnesses as detailed in Panchanama dated on 03/10/2009. They had signed the panchnama in token of agreement. Shri Shivkumar Jairamdas Goel, Director of the Noticee, in his statement recorded on 17/11/2009 had agreed to the proceedings of the panchnama. He had not retracted his statement. The noticee has paid the amount of Central Excise duty involved in the shortages in the stock of excisable goods noticed in their factory after more than one month of the drawal of panchnama i.e., on 05.11.2009 which further confirms that the noticee was in agreement with the proceedings of the panchnama. Hence it is observed that the noticee has come up with a methodology of delaying the proceedings by seeking recourse to cross examination. I therefore reject the plea of permitting of cross examination of the participants of the panchnama dtd. 08.12.2005 for the above reasons.
15 E/1463,1464/2012 ii. I also place reliance on the decision of the Hon'ble High Court Madras in the case of J. Ibrahim Vs Special Director, Enforcement Directorate, New Delhi reported in 2000 (07) LCX 0157 2001 (127) ELT 38 Mad in which the Hon'ble Court has held that the adjudicating authority has the power to reject or to permit the petitioner to cross-examine the witness. The relevant paras are as under:-
"10. In the light of the above observation, I am of the view that the adjudicating authorities, in order to enable the petitioner to give a proper explanation, have to issue show cause notice to the petitioner. In the present case, the Authority had not only served show cause notice on the petitioner but also enclosed therewith all the documents relied upon by the Authority. Instead of giving a suitable explanation, the petitioner did make a request in the letter dated 10-3-1993 asking for the opportunity to cross-examine the witnesses. This approach in my view, is not only unwarranted, but also to make the Authority not to decide the issue in the quickest possible time.
11. When there is a Statute which requires the Authority to conduct the proceedings in a particular way, the petitioner cannot ask the Authority to deviate from that way and 10 allow him to cross-examine the witnesses which is not permissible as per the aforesaid Rule. As such, I do not find any infirmity in the order rejecting the prayer to permit the petitioner to cross- examine the witnesses. So, the writ petition is liable to be dismissed as devoid of merits and accordingly, it is dismissed. No costs. Connected W.M.P. No. 15141 of 1993 is also dismissed"
iii. I also place reliance on the decision of the Hon'ble CESTAT in the case of Fortune Impex Vs CC Calcutta reported in 2001 (138) 556 (Tri.) wherein the Hon'ble Tribunal has held that, "cross examination is not to be allowed if no specific reasons are given for cross examination of witnesses and customers." This decision attained finality in the Hon'ble Supreme Court as reported in 2004 (164) ELT 4 (SC).
16 E/1463,1464/2012 B. The Transporters and The Commission Agent "To cross examination of the statement and records related to them"
i. It is observed that the noticee has sought to cross examine the aforesaid persons who have provided information needed for investigation. Copies of their statements have been provided to the noticees. Further the noticees have also taken photocopies of the documents submitted by these persons. It is therefore observed that the noticees can refute the allegations on the basis of the documents available with them or put forth the evidence to prove that the above information is false and hence there is no necessity to allow them as witnesses who have provided information to the department. Besides none, of these persons have retracted their statements.
ii. In this context, I wish to place reliance on the decision of the Hon'ble Apex Court in the case of Kanungo & Co Vs CC, Calcutta reported in 1972 (02) LCX 0005 Eq 1983 (13) ELT 1486 (SC) the Hon'ble Apex Court has held that the principles of natural justice do not require that in matters like this one the persons who have given information should be allowed to be cross examined in the presence of appellants or should be allowed to be cross examined by them on the statements made before the customs authorities. Relevant para is as under-
"12.We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show cause notice issued on August 21, 1961, all the materials on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them. In our opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities.
17 E/1463,1464/2012 Accordingly we hold that there is no force in the third contention of the appellant.
13.There is also no force in the second point because we do not read the impugned order as having wrongly placed the burden on the appellant. What the impugned order does is that it refers to the evidence on the record which militates against the version of the appellant and then states that the appellant had not been able to meet the inferences arising therefrom. In our opinion, the High Court was right in holding that the burden of proof had shifted on to the appellant after the Customs Authorities had informed appellant of the results of the enquiries and investigations The principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities."
It is also observed that the persons who have tendered statements to the Investigating officers have not retracted the same and hence providing their cross-examination is not required.
iii. In this connection, I place reliance on the decision of the Hon'ble Tribunal in the case of Nazir Ahmad Vs CC, Lucknow- 1998(101) ELT 337 wherein it has been held that-
"On the question of not providing people for cross-examination, we find that the appellants had given confessional statements which were not retracted immediately, nor has any evidence been placed on record to prove that the statements were obtained under duress and the fact further that a part of the statement is corroborated by Shri Abdul Khalik, the confessional statements cannot be just brushed aside. We also note that the panchnama was recorded before panch witnesses, at that time the appellants had neither contested the recovery of the gold biscuits, nor did they state that the gold biscuits were purchased in India and were not of Indian origin."
18 E/1463,1464/2012 iv. In view thereof, I reject the request of the notice to cross examine the above named persons of transporters. Further they doubted the authenticity of the statements of transporters. Any statement obtained under section 14 of CEA 1944 are acceptable and reliable as per Central Excise Law. The law of the land is that a statement given before an officer of Revenue is an admissible evidence and such confession is also not hit by Article 20(2) of Constitution of India [Pran Nath Dhawan-1984 (17) ELT 12 (Del High Court).
V. The Hon'ble Apex Court in the case of Hazari Singh Vs Union of India reported in 1999 (110) ELT 406 (SC) by following the judgments in the case of Asstt.Collector of Customs Vs Vallabhadas [1965 (3) SCR 854] and RC Mehta Vs State of West Bengal (1962 (2) SCR 461). has held that, "Confessional statement made to a Customs Officer, when police were not present, admissible in evidence, and do not come within the inhibition of Sections 24 and 25 of the Indian Evidence Act because Customs Officers are not police officers within the meaning of those provisions under Sections 108, 122 and 135 of Customs Act, 1962."
vi. In the case of Romesh Chandra Mehta Vs State of West Bengal reported in 1999 (110) ELT 324 (SC) the Hon'ble Supreme Court has held that Customs officer is not a police officer. Statements made before him under section 108 of Customs Act are admissible in evidence and are not hit by section 25 of Indian Evidence Act.
vii. In the case of Balkrishna Chhaganlal Soni Vs State of West Bengal reported in 1983 (13) ELT 1527 (SC) the Hon'ble Apex Court has held that, the statement given by the accused before the Customs Officer is admissible under section 107 of Customs Act 1962.
viii. In the case of Percy Rustomji Basta Vs State of Maharashtra reported in 1983 (13) ELT 1443 (SC) the Hon'ble Supreme Court has held that the section 24 of the Evidence Act has no 19 E/1463,1464/2012 application and the statement given before the Customs Officer was properly admitted in evidence in the Trial of the appellant."
ix. A similar view has been expressed by the Hon'ble Supreme Court in the case of Jethmal Vs. U.O.I. reported in 1999 (110) ELT 379 (SC) and by the Hon'ble Tribunal in the case of P. Pratap Rao Sait [1988 (33) ELT 433 (Tri)]; in the case of Hiralal Bhagat (2003 (154) ELT 124 (Tri. Kol)]; in the case of Gour Chandra Saha [1983 (14) ELT 1957 (Cegat)]: and in the case of Rajesh Tarachand Sajdeh (1983 (12) ELT 623 (Cegat)) C. Accountant of the company -To know about the allegations of the revenue and the contents of the statement taken under pressure.
It is observed that the noticee has sought cross examination of their accountant, on the pretext that the same was recorded under the threat and coercion. In support the noticees have not submitted any evidence to that effect till date. Further there is no averment seen to be made to the effect that he was subjected to any threat of arrest or that the statement was recorded under coercion. Even otherwise if it is to be considered that the reply of the noticee is retraction of the said statement the same is also of no help to the case of the noticee as the same has been done after a long long period after it was recorded.
In this regard, I find that the Hon'ble Tribunal in the case of Rollwin Engineering Company Vs CC&CE, Rajkot reported in 2004 (175) ELT 678 (Tri) held that, "Subsequent retraction of the statements of employees of appellant read with statement of proprietor accepting the charge of clandestine removal is only mechanical and cannot be made basis for holding the said statement as having been given under duress". [Para 9] I therefore hold that their request for cross examination of their accountant is not tenable and accordingly reject the same.
20 E/1463,1464/2012 D. Excise officers who prepared the show cause notice - Reason to know about the various conclusions drawn by them while making the show cause-
i. In this regard it is observed that the conclusions drawn in the show cause notice were i given to the noticee for rebuttal by way of the instant show cause notice. The said conclusions are obviously based on the records and documents relied upon in the show cause notice copies of which are already given to the noticee. This being the case no purpose is going to be achieved in cross examination of the officers who prepared the show cause notice. Hi. This view is supported by the decision of the Honourable Madras High Court in the case of Mani Bhadras Trading Co v/s CC, Chennai reported in 2010 (251) ELT. 194 (Mad) wherein it has been held that "A perusal of the judgments rendered by the Hon'ble Supreme Court in (1973) 2 SCC 438 (cited supra) and Division Bench of this Court in (2009) 4 MIJ 417 (cited supra) would clearly show that the principles of natural justice do not require cross- examination of the persons who have given information. However, in this case, while replying to the show cause notice received from the respondent department, the petitioner has pointed out that there are certain discrepancies in the materials annexed to the show cause notice and therefore, the petitioner prayed for cross-examination of the officers from DRI and GEOD Whereas, as rightly pointed out by the learned counsel appearing for the respondent, the documents relied upon by the respondent are nothing but printouts taken from the hard discs of the Personal Computers belonged to the petitioner. It is open to him to point out discrepancies if any, before the adjudicating authority. The cross-examination as sought for by the petitioner would in no way help the petitioner as there is no material given or spoken to by the respondent-department, In view of the same the request made by the noticee to cross examine the officers who prepared the show cause notice is not tenable and is rejected.
21 E/1463,1464/2012 Thus having fulfilled the tenets of natural justice. I therefore proceed to decide the case on merits."
4.4 Having gone through the above and the decision relied upon by the appellants during the course of arguments in the case of Andaman Timber Industries [2015 (324) ELT 641 (SC)], we find that the Commissioner has examined and recorded the reasons for not allowing cross examination. Once having done so, the order cannot be said to be passed in violation of the principles of natural justice.
4.5 On all other issues we find that similar issue came up before the Tribunal in the case of Shree Sidhbali Ispat Ltd. [2017 (357) ELT 724 (Tri.-Mum)] and the Tribunal has observed as follows:-
"8. The issue involved in these cases is whether the main appellant has indulged in clandestine manufacture and clearances of finished goods or otherwise; whether Revenue is able to make out a case of clandestine removal and whether penalties are to be imposed on the appellants.
9. Having heard both sides at length and after perusing the record, we are of the view that the investigations in this matter raise more questions than answer them. To say that the investigations have been slipshod in our view will only be an understatement. It appears that the vital and clinching evidence has not been brought on record for reasons beyond us. Some of the stark gaffes that we have noticed in the investigation are enumerated hereinbelow.
9.1 The notice relies upon LRs of a transporter and claims that non-duty paid goods were transported under cover of the said LRs. Surprisingly, however, the testimony of none of the consignees has been brought on record even though the LRs mentions the names and addresses of the consignees. The testimony of the consignees backed by their records would have clearly nailed the appellant, had it actually resorted to clandestine removal under the said LRs.
22 E/1463,1464/2012 9.2 The Daily Account Book Register of M/s. Aishwarya Roadlines, one of the transporters, is one of the documents relied upon in the notice. It is an admitted position in the notice that the same was prepared and maintained by one Mr. Padmakar Wankhade, Supervisor. However, no statement of Mr. Wankhade has been recorded nor is there any explanation in the notice as to why such a statement could not be recorded.
9.3 Even in respect of statements which were recorded, there seems to have been no follow up on the leads provided. For instance, Mr. Monu Pant, who is the proprietor of M/s. Aishwarya Roadlines, whose LRs/Daily Account Book Register were seized from the residential premises of his brother-in-law, had in his testimony clearly explained that his transport company was acting as a mere booking agent and did not own any truck of their own. Mr. Pant also gave names of some of the transporters who were engaged for the actual transportation. It is clear from this statement that M/s. Aishwarya Roadlines was not engaged in the actual transportation of the goods and that such transportation was being undertaken by various other transport companies. Surprisingly, despite this statement of Mr. Pant, the notice contains no reference to any investigation with the actual transporter. Neither any statements of such other transporters are on record, nor is there any explanation available as to why such statements could not be recorded.
9.4 Shortage of raw materials and finished goods during stock taking in the factory has been alleged on the basis of theoretical calculation of weight rather than actual physical weighment.
9.5 Documents said to have been obtained from the Octroi have been, are neither recovered under a panchnama nor is there any letter or document on record evidencing the same having been supplied/furnished by the Octroi Authorities.
9.6 Demands are based on documents which were recovered/seized not from the assessee's premises but from premises of third parties such as transporter's premises, premises of an employee who was residing with his brother-in- law of a key transporter in this case etc. Since these documents 23 E/1463,1464/2012 were not seized from the premises of the appellant, the burden of proving that the same pertain to the appellant lies upon the Revenue. The notice has however, without establishing how the said documents could be correlated with the appellant assumed the same to be correct and pertaining to the appellant.
9.7 Having summarised the lacunae and shortcomings in the investigation, we shall now deal with the broad evidence relied upon qua each of the demands confirmed in the impugned order and examine whether the evidence relied upon is sufficient to establish the case of clandestine removal.
9.8 The largest demand of Rs. 83.09 lakhs is based on LRs/Daily Account Book Register seized from the premises of Mr. K.K. Pandey, brother-in-law of Mr. Monu Pant - the proprietor of M/s. Aishwarya Roadlines. The evidence relied upon in support of this demand appears to be, vague and unreliable inasmuch as, except for copies of 136 LRs for the period 14-1-2008 to 30-5- 2008 and daily account book register for the period of 14-12- 2007 to 13-1-2008 and for the day of 2-4-2008, there is absolutely no other evidence that has been relied upon. Admittedly, as per the Revenue the LRs/the daily account book Register were prepared by Mr. Padmakar Wankhede, however there is no testimony of Mr. Padmakar Wankhede on record. There does not appear to us any conceivable reason as to why the testimony of the author of the document has not been brought on record. Though such a testimony, by itself would not have been sufficient to nail the appellant. However, absence of the same is clearly unexplainable. Further, from the testimony of Shree Monu Pant it comes out that M/s. Aishwarya Roadlines was acting only as booking agents and did not undertake the actual job of transportation, which was undertaken by different transporters named by Mr. Pant within his testimony. No investigation seems to have been undertaken at the end of the actual transporter. There is also no investigation at the end of the consignees whose names appear on the LRs against which goods have supposedly been cleared clandestinely. There is also no evidence in the form of unaccounted procurement of raw materials, fuel, labour, receipts of unaccounted cash, etc. which 24 E/1463,1464/2012 are some of the basic parameters which have been laid down by Courts and Tribunals over a period of time for determining whether or not the allegation for clandestine removal is established. It may be worthwhile to quote the tests that have been laid down in the case of in M/s. Nova Pharmaceuticals Pvt. Ltd. v. CCE - 2014-TIOL-15-CESTAT-AHM = 2014 (311) E.L.T. 529 (Tribunal) which approved of by the Hon'ble Delhi High Court in Flevel International v. CCE - 2015-TIOL-2230-HC-DEL- CX = 2016 (332) E.L.T. 416 (Del.). The said tests are extracted hereinbelow :
"(i) There should be tangible evidence of clandestine manufacture and clearance and not 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 for in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;
(g) statements of buyers with some details of illicit 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."
25 E/1463,1464/2012 9.9 The aforesaid ratio also finds support in the following judgments :
(a) Vishwa Traders Pvt. Ltd. v. CCE, 2012 (278) E.L.T. 362 (T), as affirmed by the Hon'ble Gujarat High Court in CCE v.
Vishwa Traders, 2013 (287) E.L.T. 243 (Guj.),
(b) Sakeen Alloys Pvt. Ltd. v. CCE, 2013 (296) E.L.T. 392 (T), which has been affirmed by the Hon'ble Gujarat High Court in CCE v. Sakeen Alloys, 2014 (308) E.L.T. 655 (Guj.),
(c) Mahesh Silk Mills v. CCE, 2014 (304) E.L.T. 703 (T), as affirmed by the Hon'ble Gujarat High Court in CCE v. Mahesh Silk Mills, 2015 (319) E.L.T. A52 (Guj.)
(d) CCE v. Air Carrying Corporation, 2009 (248) E.L.T. 175 (Bom.).
9.10 The only contrary evidence is statement of Shree Monu Pant which seeks to suggest that the goods were being clandestinely cleared by the appellant. The statement does not inspire any confidence in the absence of the same having not been examined on the touchstone of cross-examination. Further, the impugned order has recorded that the clandestine clearances reflected in the LRs were corroborated in a few cases by the rahadari/transit pass, details of which were specified in Annexure B to the SCN, no such details appear in Annexure B to the SCN nor have any details in respect of the same been furnished in the SCN. Considering the lack of evidence, it would serve no purpose to remand the matter back for seeking cross-examination of Shree Monu Pant, the gaps and the lacunae in the investigation cannot be undone by his cross-examination.
9.11 The second largest demand of Rs. 60.85 lakhs is based on the photocopies of 276 parallel invoices which are claimed, by the Revenue, to have been obtained from the Octroi department. Here again, even though the names and addresses of the purchasers are available on the alleged parallel invoices, no statement has been recorded from any of the purchasers with regard to these invoices. The best evidence has thus not been collected. Surprisingly, the notice as well as the impugned order 26 E/1463,1464/2012 is totally silent on the reasons for not recording or not been able to record the statements of the buyers. The situation with regard to the next demand of Rs. 48.40 lakhs which is based on the photocopies of 123 LRs obtained from the Octroi department is the same. One of the most appalling aspect of the investigation is that the Revenue has not even placed on record the document under cover of which these photocopies of LRs and invoices were obtained from the Octroi department. Further the said documents are admittedly photocopies. It is settled law that photocopies are not credible evidence and it becomes necessary for any investigating authority to place on record authenticated copies of such photocopies in case the originals are not available. Here, not only there is lack of authentication from the Octroi department but there is not even a covering letter available on record to establish that these photocopies are obtained from the Octroi department. These photocopies are therefore rendered unreliable. Whatever little case that the Revenue could have, if at all made out, based on such unauthenticated photocopies, does not survive in the instant case in the absence of any investigation with the consignees/purchasers shown in these invoices/LRs.
9.12 Further it is relevant to note here that with respect to the said 276 parallel invoices, statements of Mr. Pandey, Vice- President and Mr. D.D. Rathi, Manager (Commercial & Accounts) of the Appellant Company were recorded and both of them have, in their statements dated 18-9-2009 and 17-9-2009 respectively, denied the existence of such parallel invoices by the appellant. Insofar as the 123 LRs supposed to have been received from the Octroi department have been received, the investigating authority did not even deem it necessary to record statement of the appellant's personnel all the same.
9.13 The statement of the transporters which have been relied upon to corroborate the said records supposed to have been furnished by the Octroi authorities, also do not support the case of the Revenue inasmuch as a reading of their statements show that mostly all of them were commission agents who had only arranged for transportation and used to hand over blank LR 27 E/1463,1464/2012 copies to the actual transporters and did not maintain any records regarding actual transportation having been undertaken, as they were concerned only with the commission for arranging the transport. No testimony of the actual transporter, if any, has been recorded. The statements of the transporters in question are without reference to any documentary evidence/record maintained by them and are completely uncorroborated. The statement of the transporters clearly brings out the fact that they were handing over the blank copy of the LRs to the actual transporters. This factor by itself is sufficient to discard the testimony of the transporters as they had no knowledge whatsoever of whether or not goods had actually been carried under the cover of the LRs.
9.14 The statements of the transporters, though not relevant, the reasoning assigned by the respondent for rejecting the cross-examination of the transporters is completely untenable. The respondent has placed reliance on the decision of the Tribunal in the case of Mayamahal Industries v. CCE reported in 1995 (80) E.L.T. 118 in support of decision to reject cross- examination. In our view the Revenue alleged for denying cross- examination, on the sole ground that the transporters were co- noticees, is untenable. It is settled law that while a co-noticee has a right to refuse to be subjected to cross-examination, it is incumbent upon the part of the adjudicating authority to put it to the co-noticee whether he would be willing to subject himself to cross-examination. In any case the statements being unreliable no adverse inference can be drawn solely based on them.
9.15 The position with regard to the demand of Rs. 55.92 lakhs which is based on the copies of Truck Destination Register maintained by another transporter, namely M/s. Akola Goods Transporter, Chandrapur, is no different. Here again, no investigation seems to have been conducted at the end of the alleged consignees whose name appear in the said Truck Destination Register. The actual receipt of the goods by the consignees is thus not established. No investigation was undertaken to bring on record the author of the said truck destination register. The said statement of Mr. Shakheel Khan 28 E/1463,1464/2012 shows that M/s. Akola Transport Co. was only acting as a commission agent and were merely arranging for transportation rather than actually transporting the goods themselves in their own trucks. No investigations have been conducted with the actual transporters engaged by M/s. Akola Transport Co. The Books of Account of M/s. Akola Transport Co. have also not been examined to find out the names of the actual transporters. In any case it is settled law laid down by the Hon'ble High Court of Patna in CCE v. Brims Products, 2011 (271) E.L.T. 184 (Pat.), that allegation of clandestine removal cannot be sustained based merely on transporters' records which are not corroborated by any other evidence.
9.16 Even in regard to the smaller demand of Rs. 10.58 lakhs based on the alleged shortage of raw materials/finished goods, the explanation given by the appellant on the very next day of the Panchnama wherein the shortages were disputed have not been countered or dealt with in the notice. Further the Panchnama as clearly record that the stock positions have been worked out based on theoretical calculations by assuming the length, breadth, width of the raw materials/finished goods. Such theoretical calculations cannot be the basis for foisting demand on account of shortages.
9.17 In these circumstances, we are left with no option but to draw an adverse inference against the investigation in all the aforesaid cases as the best evidence which was easily available and steering in the investigators on the face have been either not examined or, if examined, the results of such examination was not convenient or supporting the Revenue's case. The evidence relied upon in the notice, no doubt, create a lot of suspicion against the conduct of the appellant but as such these evidences all of which are recovered from third party's premises by themselves cannot prove the case of clandestine removal against the appellant unless their contents are corroborated by independent evidence. In this case, we find that such corroborative evidence is totally missing. There is no answer available, either in the show cause notice, or in the impugned order, to explain the absence of statements of most relevant 29 E/1463,1464/2012 persons such as the consignees/buyers shown in the invoices/LRs/Truck Destination Register/Books of Accounts etc. The transporters, who actually transported the goods, have also not been questioned. In short, the investigation has failed to establish the case of clandestine removal.
9.18 There are further two demands of Rs. 4,61,172/- and Rs. 2,40,575/- which have been confirmed. These demands are not entirely based on third party records and find support from some statements which have been recorded in course of investigation. While the demand for Rs. 4,61,172 is based on 11 invoices seized from the premises of Shree K.K. Pandey. Mr. Rajeev Verma, Dispatch Supervisor, in the statement dated 22-12-2008 has accepted that the 11 parallel invoices were prepared and issued by him under signature as per direction of Mr. K.K. Pandey. Mr. K.K. Pandey and Mr. D.D. Rathi have in their statements dated 29-7-2008 identified the signature of Mr. Rajeev Verma on the parallel invoices. Likewise, Mr. Hriday Deb in his statement dated 10-9-2008 has also confirmed the signatures in the parallel invoices. Insofar as demand for Rs. 2,40,575 with reference to certain chits which were seized from the residential premises of Mr. Anil Kansal, Managing Director of the Appellant Company. In respect of these demands also there is no testimony of the buyer or evidence of illicit cash having been received. The demand is primarily on the statements, authors of which have not been offered for cross-examination. In the interest of justice, the matter to the extent needs to be remanded and the appellant deserves to be granted an opportunity for cross-examination, whereafter the adjudicating authority can decide afresh.
9.19 The impugned order had also referred to certain collateral evidence to corroborate the allegation of clandestine removal. We have perused through the said additional evidence and find that not only is the same unreliable but the same also does not support the theory of clandestine removal.
9.20 The order records that there were 8 hard disks that were seized from the residential premises of Mr. K.K. Pandey however it is an admitted position that the said hard disks were cloned in 30 E/1463,1464/2012 some private organization by the name of AGAPE Inc., Nagpur. In fact, 2 of the 8 hard disks after being cloned showed loss of master boot record and were recloned. In our view such cloning and recloning, which is not in accordance with the provision of 36B of the Central Excise Act, 1944 and has been done at some private organization cannot be accepted.
9.21 Paragraph 21(I) of the impugned order refers to print out that were taken from the cloned hard disks and a statement prepared by comparing the closing balances that had been furnished to the banks, as appearing in the hard disks, vis-à-vis that appearing in the RG-1 register. This comparative statement cannot be used to draw any adverse inference as firstly the veracity of the cloned hard disk is in serious doubt and secondly it is an undisputed position that the actual stock statement furnished to the bank has been seized from the residential premises of Mr. D.D. Rathi. It is surprising as to why, no comparison has been made between the actual figures submitted to the bank and the RG-1 figures. In any case it is settled law laid down by the Apex Court in the case of CCE v. Synfab Sales - 2015 (318) E.L.T. 38 (S.C.) that clandestine removal cannot be alleged by merely comparing the stock figures submitted to the bank and those in the RG-1. For the same reason the report regarding the valuation of the closing stock as on 30th June, 2007 and 31st March, 2007 reflecting therein the stock position of iron ore which was compared with the balance thereof in the statutory records, is not reliable.
9.22 The comparison of the production log sheet printed from the cloned hard disks vis-à-vis the production recorded in the RG-1 also cannot form a basis for alleging clandestine removal as the RG-1 records the actual production, after approval from the quality control department while the log sheet records whatever has been manufactured, though a part of the same may be due to defect in the quality be recharged in the furnace. Surprisingly no explanation of the appellant's personnel has been sought on this issue. Likewise, the comparison of the production approved by the Quality Control department as reflected in its QC reports, which were compared on 10 odd random dates with 31 E/1463,1464/2012 the actual production recorded in the RG-1 is concerned, the difference between the two has been explained on account of the fact that the QC department does not prepare its report on a real time basis and that based on approval from the QC the production is entered in the RG-1 even though the QC report may be prepared on a subsequent date. This explanation though advanced before the adjudicating authority has not been taken cognizance of. In the absence of there being any evidence to the contrary as also there being an absence of any investigation having been undertaken, no adverse inference can be drawn against the appellant.
9.23 The impugned order has, on internal Page 40 of the impugned order, referred to certain additional evidences based on file at Sl. No. 19 seized from the premises of Mr. K.K. Pandey. The same primarily refers to certain accounting entries in respect of M/s. UGAC Steels Pvt. Ltd., N.R. Steel, Akash Steel Sales to suggest that the entries made therein were beyond what had been recorded in the excise records of the appellant. It is to be held that no adverse inference can be drawn based on such accounting entries as firstly, no investigation has been carried out with the said parties. Secondly, neither Mr. K.K. Pandey nor any of the employees have been questioned with respect to the same. Thirdly, the said accounting entry does not by itself imply that the goods had been clandestinely cleared. It could have been an entry for loan or could have been a trading transaction, unconnected with excise.
9.24 As regards the penalties imposed on main appellant, we find in view of the foregoing, the demand itself is not sustainable hence the question of interest and penalties does not arise."
4.6 Upholding this order, Hon'ble Bombay High Court, as reported at [2021 (376) ELT 229 (Bom)], has held as follows:-
"5. The following questions of law have been framed for our consideration.
"1. Whether a case of clandestine clearance of excisable goods without payment of Central Excise duty is required to be 32 E/1463,1464/2012 established on the principle of "beyond reasonable doubt" or on the principle of "preponderance of probability"?
2. Whether clandestine clearance of excisable goods without payment of Central Excise duty in this case can be established on the principle of "preponderance of probability"?
3. Whether the cross-examination of co-Noticees in a case of clandestine clearance of excisable goods without payment of Central Excise duty is necessarily required to be permitted in each and every situation?
4. Whether the Hon'ble Tribunal was legally correct in holding that in the absence of cross-examination of the co-Noticees in this case, the documentary evidence itself lost its relevance, especially when none of the statements had been retracted by the tenderers?
5. Whether the Hon'ble Tribunal was legally correct in deciding the issues involved in this case without taking into consideration the settled judicial position and by ignoring vital evidences presented by the Department?"
6. The questions of law which have been framed are stated to arise in the following facts. The Respondent is engaged in manufacturing of iron and steel products viz. sponge iron, M.S. Ingots and Bars. The Officers of the Central Excise Department visited the factory of the Respondent and carried out search. Search was also carried out of the residential premises of the Directors, Vice Presidents, etc. According to the Appellant, on perusal of the actual stock with accounted stock, shortage of finished goods on which duty was payable was found. In the search operation carried out in the residential premises, record contained in hard-disks was collected, statements of staff members were also recorded and the staff members gave their explanations. Thereafter, further searches were carried out, which resulted in a show cause notice dated 26 March, 2010. The show cause notice directed the Respondent to show cause why an amount of Rs. 2.82 Crores towards Central Excise Duty alleged to have been evaded should not be recovered and penalty should not be imposed on the Directors. The 33 E/1463,1464/2012 Adjudicating Authority proceeded to adjudicate and confirmed the demands under several heads by the order dated 11 November, 2011. The Respondent, the Directors and the Transporters filed appeals, which were heard together by the Tribunal and allowed by the impugned order dated 22 March, 2016.
7. The Learned Counsel for the Appellant submitted that the assessment of evidence by the Tribunal is not correct and unduly stringent burden is placed on the Appellant to demonstrate clandestine removal of goods. He submitted that this approach of the Tribunal gives rise to the questions of law as framed. The Learned Counsel for the Respondent has supported the impugned order and contends that the Appeal does not involve any question of law, but raises only questions of fact.
8. Various demands were confirmed by the Original Authority. The Tribunal found that there were serious lacunae in the investigation and analyzed those lacunae in respect of each of the demand. The largest demand was of Rs. 83.09 Lakh and the evidence in respect of the said demand was 136 LRs and daily book register and there was no evidence that so produced that could be relied upon. The investigation was not carried out at the end of the actual transporters and from the testimony of the staff member, who was examined, it transpired that M/s. Aishwarya Roadlines, the alleged transporter was mere a booking agent. The Tribunal relied upon the decision of the Delhi High Court in the case of M/s. Nova Pharmaceuticals Pvt. Ltd. v. CCE [2014-TIOL-15-CESTAT-AHM = 2014 (311) E.L.T. 529 (Tri.
- Ahmd.)] which approved by the Delhi High Court in Flevel International v. CCE [2015-TIOL-2230-HC-DEL-CX = 2016 (332) E.L.T. 416 (Del.)] to emphasize upon the degree of proof required. The person whose statement was relied upon by the Appellant was not allowed to be cross-examined by the Respondent. Thus, the Tribunal rightly found that there were serious lacunae.
9. As regards the second demand of Rs. 65.85 Lakh, the Tribunal found that the documents recovered from the Octroi Department were only photocopies. The statements of 34 E/1463,1464/2012 transporters were without reference to any documentary evidence. Even the transporters were not allowed to be cross- examined. In respect of the demand of Rs. 55.92 Lakh, no investigation was carried out at the end of the consignee. The demand of Rs. 58 Lakh was based on theoretical calculations. Further the smallest demands of Rs. 4,61,000/- and Rs. 2,40,575/- were also based on statements whose Authors were not offered for cross-examination.
10. The Tribunal also found that the evidence stated to have been recovered from the hard-disks was from the hard-disks (sic) which were cloned and showed loss of master boot record. The production of log-sheet so printed from cloned hard-disks, which the Tribunal rightly found could not be relied upon. The Tribunal also referred to Section 36B of the Act of 1944 in respect of cloning and recloning of the hard-disks.
11. Therefore, the Tribunal had analyzed evidence in respect of each demand, found that the evidence recovered through the hard-disks was not as per the provisions of the Act of 1944, the statements which were used against the Respondent whereof persons who have not allowed to cross-examine. It cannot be said that the assessment of evidence was perverse. Even assuming the burden was not stringent, even that burden was not satisfactorily discharged by the Appellant. Rest of the issues are purely questions of fact. Therefore, the issues raised and the questions framed in this Appeal are not questions of law.
12. In view of the findings that the demands were rightly not established against the Respondent, the issue of penalty does not survive."
5.1 In view of the above order of Hon'ble Bombay High Court, we do not find merits in the impugned order except for the amounts which are admitted by the appellants in respect of the shortages noticed during the course of panchnama proceedings undertaken at their premises.
35 E/1463,1464/2012 5.2 The impugned order is accordingly upheld for demand confirmed at (a) and set aside in respect of all other demands and penalties.
5.3 Appeal of appellant 1 is thus partly allowed and the appeal of appellant 2 is allowed setting aside the penalty imposed on him.
(Order pronounced in the open court) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) tvu