Custom, Excise & Service Tax Tribunal
Hari Om Industries Pvt. Ltd. vs Cgst Kanpur on 25 June, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT No.II
Excise Appeal No.70382 of 2023
(Arising out of Order-in-Appeal No.953 & 954/CE/Alld/2023 dated 02/05/2023
passed by Commissioner (Appeals) Central Excise & Service Tax, Allahabad)
M/s Hari Om Industries Pvt. Ltd., ....Appellant
(Arazi-841 & 825,
Bengali Purwa, Pratappur, Kanpur)
VERSUS
Commissioner of Central Excise &
CGST, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur-208005) WITH Excise Appeal No.70397 of 2023 (Arising out of Order-in-Appeal No.953 & 954/CE/Alld/2023 dated 02/05/2023 passed by Commissioner (Appeals) Customs, Central Excise & Service Tax, Allahabad) Mr. Virender Kumar Gupta, of ....Appellant (M/s Hari Om Industries Pvt. Ltd., Arazi-841 & 825, Bengali Purwa, Pratappur, Kanpur) VERSUS Commissioner of Central Excise & CGST, Kanpur ....Respondent (117/7, Sarvodaya Nagar, Kanpur-208005) APPEARANCE:
Shri Amit Awasthi, Advocate for the Appellant Shri Santosh Kumar, Authorised Representative for the Respondent CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NOs.70339-70340/2025 DATE OF HEARING : 21 April, 2025 DATE OF PRONOUNCEMENT : 25 June, 2025 SANJIV SRIVASTAVA:
These appeals are directed against Order-In-Appeal No. 953/CE/Alld/2023 & 954/CE/Alld/2023 dated 02.05.2023 of the Excise Appeal Nos.70382 & 70397 of 2023 2 Commissioner (Appeals) Central Goods and Service Tax and Central Excise, Allahabad. By the impugned order, Order-in- Original No.12/CE/Hariom Industries/AC/Div.IV/2022 dated 16.11.2022 holding as following has been upheld:
"ORDER
i) I hereby confirm the demand of Central Excise duty amounting to Rs.33,77,422/- (Rupees Thirty Three Lac Seventy Seven Thousand Four Hundred Twenty Two Only) upon M/s Hariom Industries Ltd., Arazi 841 & 825, Bengali Purwa, Bhauti Pratappur, Kanpur, under the proviso to Section 11A(4) of the Central Excise Act, 1944 read with Section 174 of the CGST Act, 2017, against clandestine production and clearance of kraft paper,
ii) I hereby appropriate Central Excise duty amounting to Rs. 25,00,000/- (Rupees Twenty Five Lakhs Only) deposited during investigation by M/s Hariom Industries Ltd., Arazi 841 & 825, Bengali Purwa, Bhauti Pratappur, Kanpur, against the liability confirmed at S.No. (i) above;
iii) I hereby confirm the demand of CENVAT Credit of Service Tax, taken and utilized wrongly, amounting to Rs.3,19,176/- (Rupees Three Lac Nineteen Thousand One Hundred Seventy Six Only) from M/s Hariom Industries Ltd., Arazi 841 & 825, Bengali Purwa, Bhauti Pratappur, Kanpur, under section11A(4) of the Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004 and Section 75 of the Finance Act, 1994, read with Section 174 of the CGST Act, 2017;
iv) I hereby confirm the demand of Central Excise duty the amount of Rs.74,827/- (Rupees Seventy Four Thousand Eight Hundred Twenty Seven Only) from M/s Hariom Industries Ltd., Arazi 841 & 825, Bengali Purwa, Bhauti Pratappur, Kanpur, under section 11A(4) of the Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit Excise Appeal Nos.70382 & 70397 of 2023 3 Rules, 2004, read with Section 174 of the CGST Act, 2017 against clandestine removal of HDPE fabric 'as such';
v) I hereby order to recover interest under Section 11AA of Central Excise Act, 1944 read with Section 174 of the CGST Act. 2017, payable at the rates fixed by the Central Government on the amounts of Central Excise duty/ CENVAT Credit confirmed at S.No. (i), (iii) & (iv) above;
vi) I hereby impose total penalty amounting to Rs.37,71,425/- (Thirty Seven Lacs Seventy One Thousand Four Hundred and Twenty Five only) upon M/s Hariom Industries Ltd., Arazi 841 & 825, Bengall Purwa, Bhauti Pratappur, Kanpur under Rule 25 of Central Excise Rules, 2002 and Rule 15 of Central Excise Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 & Section 78 of the Finance Act, 1994, read with Section 174 of the CGST Act, 2017 for their acts of omission and commission as mentioned in preceding paras.
vii) I hereby also impose penalty of Rs.37,71,425/- (Thirty Seven Lacs Seventy One Thousand Four Hundred and Twenty Five only) upon Shri Virendra Kumar Gupta, Director of M/s Hariom Industries Ltd., Arazi 841 & 825, Bengali Purwa, Bhauti Pratappur, Kanpur under Rule 26(1) of the Central Excise Rules, 2002 read with Section 174 of the CGST Act, 2017, for the reasons discussed hereinabove."
2.1 Appellant No.1 having Central Excise Registration No. AACCA9051EEM001 is registered with the Department under the Central Excise Act, 1944, and are engaged in manufacturing of M G Kraft Paper. Appellant 2 is the Director of Appellant 1.
2.2 Acting on intelligence that Appellant 1was indulged in purchasing mostly unaccounted waste paper (basic raw material) in the shape of old discarded corrugated boxes & other paper Excise Appeal Nos.70382 & 70397 of 2023 4 scrap and on cash payment and was removing the Kraft Paper under fake and parallel invoices, thereby evading the central excise duty, searches were conducted by the officers of Director General Central Excise Intelligence at the factory and office premises of the Appellant 1 and the residential premises of Appellant 2, Shri Sanjay Gupta (Manager) of Appellant 1 along with premises of suppliers of waste paper and buyers/ traders of M.G Kraft paper on 22.06.2015, 23.06.2015 & 24.06.2015.
2.3 During search in the factory premises of Appellant 1, the officers resumed various statutory/ private records along with 02 CPUs as detailed in Annexure- B to the Panchnama dated 22.06.15.
2.4 The officers also physically verified the stock of M.G. Kraft Paper, Waste paper & HDPE Roll (packing material) available in the factory. Since, the party could not produce the records showing correct balance of raw materials and finished goods as on the date of search, the stock physically verified was detained under the said panchnama. Later on, party vide their letter dated 01.12.2015 provided balance of stock position of goods as on 22.06.15. Comparison of stock of goods physically verified on 22.06.15 and the book balances as on 22.06.15 as provided by the party, revealed an excess in stock of goods of 51.523 MT of M.G. Kraft Paper and shortage of 5050.8 Kg of HDPE Roll from its book balances. Further, excess found Kraft paper was seized and SCN issued under F.No. DGCEI/KRU/INV/47/Part- 1/2015/1025-30 dated 15.12.15.
2.5 The records resumed at office premises of Appellant 1& residential premises of Appellant 2 also included records of M/s M.G.Craft Corporation, Kanpur. Later on, Appellant 1 vide letter dated 09.07.2015 intimated deposit of Rs. 15,00,000/- and Rs. 10,00,000/- respectively vide Challan Nos. 90425 dated 29.06.2015, 90429 dated 29.06.2015 and 90152 dated 08.07.2015 against central excise duty due from them.
Excise Appeal Nos.70382 & 70397 of 2023 5 2.6 Statement of Appellant 2 was recorded under Section 14 of the Central Excise Act, 1944 on 20.07.2015, wherein he interalia stated that he was -
one of the Directors in Appellant 1 and looking after all works of the unit.
purchasing waste paper indigenously and also importing it from USA & UAE. Payment was done by him through cheque.
looking after the work of marketing of Appellant 1. Orders were booked telephonically and purchase orders were generated by him on computer. Thereafter, dispatches were made accordingly and payments were received through cheque. Shri Sudhansu, Accountant was issuing the invoices pertaining to Appellant 1. All the invoices were issued as per the directions given by him. They were availing cenvat credit on waste paper and machinery parts. They were also availing Cenvat Credit of service tax on GTA service in Appellant 1.
M/s M. G Craft Corporation was their dealer dealing in Kraft paper. Since, Shri Manoj Kumar Gupta, proprietor of the said trading firm, was his cousin and availing services of his accountant, records of M.G. Craft Corporation were lying in his office and residence.
Duplicate set of Invoice No. 391 dated 17.06.2015, 392 dated 17.06.2015 and 396 dated 18.06.2015, issued by Appellant 1 to A.R. Enterprises, Kanpur, Sufi Packaging Industries, Kanpur and Goel Marketing Agencies, Kanpur respectively, resumed from residential premises of Virendra Kumar Gupta were not parallel to the invoices having the same serial numbers resumed from factory premises. These invoices were generated by their accountant mistakenly and were given to him. Instead of intimating to the Range Oflice, he kept the invoices in his bag and the same were recovered from his residence.
Excise Appeal Nos.70382 & 70397 of 2023 6 Admitting the mistake, he had already deposited a sum of Rs. 25 lakh towards clandestine clearances of past.
2.7 Shri Sudhansu Dixit S/o Shri Durga Shankar Dixit in his statement dated 18.11.2015, recorded under section 14 of the Central Excise Act, 1944, stated that he was doing billing work in Appellant 1 during the period May, 2015 to July, 2015.
As regard the billing process adopted in the factory, he stated that excise invoices were prepared by him on the computer as per the details and orders given by Appellant
2. After loading of the goods, the Invoices prepared were printed and the four copies of the Invoices were sent to Appellant 2 for his signature.
the parallel invoices resumed from residence of Appellant 2 during search on 22.06.15, were prepared & printed by him under the directions of Appellant 2. After editing invoices, other invoices of the same serial numbers in the name of different parties were prepared by him.
2.8 During search at the premises of M.G. Craft Corporation, located at Shop No.6, Chakarpur, Kanpur, on 22.06.2015, a restaurant was found running by the officers on the said address. Shri Vinod Kumar, Proprietor of the restaurant informed the officers that he was running restaurant at Shop No. 5 & 6, Chakarpur from the year 2011 and no firm in the name of M.G.Craft Corporation existed at the given address. Accordingly, a Panchnama dated 22.06.2015 was drawn on the spot by the officers. Later on, on being asked M.G.Craft Corporation vide letter dated 05.10.2015 provided Sales & Purchase details along with VAT returns of the firm for the period 2013-14 to June, 2015. Shri Manoj Kumar Gupta, Proprietor of M.G. Craft Corporation, in his Statement dated 17.11.2015 has stated that his firm was dealing in purchase & sale of waste paper and kraft paper.
Excise Appeal Nos.70382 & 70397 of 2023 7 they were purchasing waste paper from local Kabadis and Kraft paper from APPELLANT 1 and Mars Chemicals. the whole quantity of waste paper and kraft paper purchased was sold as such from the premises of kabadis or the manufacturer of kraft paper, without bringing the same to their place.
2.9 During scrutiny of records resumed from residential premises of Appellant 2, certain bilties of kraft paper showing M.G. Craft Corporation as 'consignor' were found placed in the files resumed under Sl no. 51 & 52 of the panchnama dated 22.06.2015, against which no sales invoices were found issued by the M.G.Craft Corporation. To clarify the issue, summons dated 24.01.2018 was issued to Manoj Kumar Gupta, but in response Smt. Renu Gupta w/o Manoj Kumar Gupta vide letter dated 31.01.2018 informed that he had expired on 16.06.2017 in an accident and except him there is no one to explain about his business.
2.10 Retrieval of data from the 02 CPUs resumed from factory premises of Appellant 1 and the 03 external hard disks resumed from residence of Appellant 2, was done and placed in one external hard disk bearing P/N WDBUZGSOOOABK-03 by the computer expert under Panchnama dated 02.09.2015 and 18.09.2015 respectively, in presence of Appellant 2. On 23.03.2017, in connection with investigation, printouts of data placed in external hard disk bearing P/N WDBUZGSOOOABK-03 prima-facie appearing relevant was taken under Panchnama dated 23.03.2017.
2.11 In connection with the investigation of the case, the torn documents and papers resumed from the office premises of Appellant 1 and packed in a sealed carton under panchnama dated 22.06.2015 were segregated in presence of Appellant 2 under Panchnama dated 18.09.2015. The paper/ documents (69 pages), found in readable condition, were kept in a separate file Excise Appeal Nos.70382 & 70397 of 2023 8 and other torn papers in readable condition were kept in a yellow coloured envelope for further investigation.
2.12 In the Statement dated 15.02.2018, Appellant 2 stated that:-
Orders were received from buyers directly or through dealers for supply of Kraft paper directly to actual consumer (buyer) on commission basis. In any case, orders procured were recorded in the form of 'Purchase Order' (a fixed format) containing Order No., Dealer Name, Billing Address, Delivery Address, Specification & Quantity of kraft paper ordered, etc. When kraft paper of desired specification became ready for dispatch, the same was loaded, weighed and removed under 'Sales Invoice' and 'Sales Challan'. Invoices were issued to the person given in the Billing Address and delivery was made at the delivery address. Reel wise detail of Kraft Paper removed under sales invoice were mentioned in Sales challan.
Neither in the format of Purchase Order, any space for corresponding invoice number had been specified; nor on the sales invoices, respective purchase order numbers were mentioned by them. However, to corelate kraft paper cleared against a purchase order; after clearances of Kraft Paper, they record removal details on respective purchase order and order number on the triplicate/ quadruplicate copy of corresponding invoice/ challan issued, by pencil/pen.
Month wise running serial numbers were allotted to the purchase orders generated. For example, for the orders of May, nos. were allotted as M-1, M- 2,.....; for the orders of June, nos. were allotted as J-1, J-2,....
Invoices were issued for the actual quantity dispatched.
Actual quantity dispatched can be more or less than quantity ordered.
Excise Appeal Nos.70382 & 70397 of 2023 9 2.13 During scrutiny of records resumed from the residential premises of Appellant 2, copy of certain Purchase Orders generated by Appellant 1 i.e. Original- Triplicate & Quadruplicate copy of certain sales invoices of M.G. Kraft Paper along with respective sales challans issued by Appellant 1 and weighment slips of 'Paper' issued by dharamkanta located outside factory were found placed in the files resumed under SI.no. 49, 51 and 52 of the Panchnama dated 22.06.15. On the face of the Purchase orders certain vehicle numbers were found noted by pen.
2.14 On correlation of these documents, the invoices were found issued to the person whose name were given in the billing address of the purchase orders and the vehicle number shown on the invoices were the same to that noted on the purchase orders. On the respective sales challans, SL. no. of the purchase orders were also found noted. Date & vehicle number given on the weighment slips also tallied with that shown on these invoices. Apparently, kraft paper was removed from the factory of Appellant 1 under these sales invoices.
2.15 Further, scanned copies of sales invoices of M.G. Kraft paper issued by Appellant 1, print out of which were taken under panchnama dated 23.03.17 from the data saved in electronic devices resumed, were also scrutinized with the accounted for sales invoices issued by the Appellant 1, resumed/tendered during statement dated 26.02.2018. During scrutiny, scanned copy of sales invoice no. R01254/01.03.15 did not tally with the accounted for sales invoice bearing the same SI Number.
Aforesaid resumed sales invoices and the accounted for sales invoices bearing same serial numbers were found issued against different purchase orders, to different consignee, for different quantity & value and for different vehicles. A Chart was prepared by the officers on the basis of aforesaid documents and the accounted for sales invoices issued by Appellant 1 bearing the same serial numbers. After having seen the Chart (No.01) along with all the relevant documents on the basis of which it was Excise Appeal Nos.70382 & 70397 of 2023 10 prepared, Shri Virendra Kumar Gupta verified the Chart and found as per the said documents & correct. He has put his dated signature on the chart in token of his satisfaction regarding its correctness.
2.16 In the Statement dated 26.02.2018 Appellant 2 stated that:-
He had carefully gone through the page no. 17 & 18 of print-outs taken under panchnama dated 23.03.017 which were scanned copies of writings and found that it contained date wise entries of Kraft paper removed from the factory detailing quantity of Kraft paper removed, name of consignee and total amount payable by the buyer. For example, o first entry noted on 10.01.2015 at page no. 17 written as "10/1/ GM 3713K 16 105687/- 3713° means 3713 Kg of Kraft paper of 16 BF was removed to G.M. Paper Products Co. PVL Ltd. for total amount of Rs. 1,05,687/- under commission of Rs.3713/-. o Similarly, entry noted on 28.01.2015 at page no. 17 written as "28/1/ GM 13467 18 383327/-13467/-"
means 13467 Kg of Kraft paper of 18 BF was removed to G.M. Paper Products Co. Pvt. Ltd. for total amount of Rs. 3,83,327/- under commission of Rs. 13,467/-.
Out of the removals of Kraft paper mentioned in the aforesaid print-outs, the removals on 12.01.2015, 29.01.2015, 07.02.2015, 12.02.2015, 14.02.2015, 16.02.2015, 24.02.2015 and 27.02.2015 were made without issuing any invoice and no duty had been paid on these removals of kraft paper. He accepted the liability of duty on it.
2.17 During scrutiny of records resumed from the factory premises of Appellant 1, certain loose paper slips were found placed at page number 55 to 59 of the file resumed SL no. 27 of Excise Appeal Nos.70382 & 70397 of 2023 11 the Panchama dated 22.06.15 having hand-written entries prima facie related to sales of M.G. Kraft paper. On correlation of entries noted In the aforesaid loose paper slips with the accounted for sales invoices of M.G. Kraft Paper issued by the Appellant 1, sales invoice was found issued against removal of kraft paper mentioned at paper slip no. 55. Apparently, removals of M.G. Kraft paper from the factory of Appellant 1 were recorded on the aforesaid loose slips. On the basis of entries made in the aforesaid paper slips and corresponding sales invoices issued by Appellant 1, a Chart (No. 03) was prepared by the officers and shown to Appellant 2 during statement dated 26.02.18. After having seen the Chart (No.03) along with all the relevant documents on the basis of which it was prepared, he verified the Chart and found as per the said documents & correct. He has put his dated signature on the chart in token of his satisfaction regarding its correctness. In the Statement dated 26.02.2018 he stated that:-
He had carefully gone through the loose paper slips placed at page number 55 to 59 of the file resumed from the factory premises of Appellant 1under Sl.no. 27 of the panchnama dated 22.06.15 and found that each slip contain detail of removal of kraft paper mentioning therein total quantity of kraft paper removed (in MT & in reels), size & weight of each reel and vehicle number through which the kraft paper was removed from the factory. The paper slips at page no. 56, 57, 58 and 59 were of 22.06.2015, i.e., the date of search in the factory. Further, vide their letter dated 23.06.15, addressed to the Assistant Director, DGGI, it was informed that 03 loaded trucks of Kraft paper were present in the factory premises at the time of search for which invoices were prepared but not issued as the same were not dispatched.
He admitted that one consignment out of the aforesaid 04 paper slips had been removed without issuance of any invoice, whereas 03 paper slips were related to the said 03 Excise Appeal Nos.70382 & 70397 of 2023 12 trucks. However, since neither the letter dated 23.06.2015 mention registration number of loaded trucks nor cancelled copy of prepared invoices are available to prove that Kraft paper mentioned in the 03 paper slips were related to the trucks mentioned in the said letter, he accepted the liability of duty on the Kraft paper mentioned on all the 04 paper slips at page number 56, 57, 58 and 59.
2.18 During further scrutiny of seized records, certain other purchase orders (generated by Appellant 1), packing lists, weighment slips of Paper' (of outside dharamkanta), hand- written parchies, notings and bilties of Kraft paper showing M.G.Craft Corporation as 'consignor', suggesting removal of Kraft paper from the factory, were found placed in the files resumed under Sl.no. 19 & 27 of the panchnama dated 22.06.2015 drawn at the factory premises of Appellant 1& the files resumed under Sl. Nos. 49, 51 & 52 of the panchnama dated 22.06.2015 drawn at the residential premises of Appellant 2 and in the sorted-out papers/ documents placed in a separate file under panchnama dated 18.09.2015 after segregation from the torn documents/ papers resumed under Sl no. 53 of the panchnama dated 22.06.2015 drawn at the office premises of Appellant 1.
2.19 To examine these documents, a Chart (No. 04) was prepared on the basis of entries made in the aforesaid documents & the corresponding sales invoices issued by Appellant 1, if any and shown to Appellant 2 during statement dated 07.03.2018. After having seen the Chart (No.04) along with all the relevant documents on the basis of which it was prepared, Appellant 2 verified the Chart and found as per the said documents & correct. He has put his dated signature on the chart in token of his satisfaction regarding its correctness. In the Statement dated 07.03.18 recorded under Section 14 of the Central Excise Act,. 1944, in respect of documents mentioned in the Chart (No.04), he stated that:-
Excise Appeal Nos.70382 & 70397 of 2023 13 He had seen all the six weighment slips of 'Paper' issued by dharamkanta bearing nos. 766, 595, 773, 768, 717 and 841 containing gross, tare & net weight of loaded vehicle, vehicle number and date & time of weighment of empty & loaded vehicle and admitted that the aforesaid weighment slips pertain to removals of Kraft paper from the factory of Appellant 1.
He had carefully examined the purchase orders/ packing lists pertaining to order nos. J-58, J-104, J-108, J-106, J- 101, J-53, J-107, J-54, J-56, J-99 and J-105 shown to him and compared the name of consignee, quantity of Kraft paper, vehicle number, etc. given on it with that of weighment slips of 'Paper' bearing nos. 630, 694, 656, 674, 620, 859, 621, 827, 642, 628 & 653 and respective bilties; and confirmed removal of Kraft paper from the factory against these purchase orders/ packing lists. The weighment slips shown were of respective loaded vehicle in which these removals of Kraft paper were made from their factory. Copies of bilties shown pertain to transportation of consignment of Kraft paper of the said weighment slips, having same vehicle number and date. He had carefully examined the purchase orders/ packing lists pertaining to order nos. J-49, J-110, J-74, J-57, J- 107, J-86, J-88, J-102, J-109, J-91, J- 103, J-115 and M- 235 shown to him along with corresponding weighment slips of Paper' bearing nos.2500, 889, 745, 723, 753, 741, 724, 788, 775, 803, 787, 786 & 749 and respective bilties and confirmed removal of Kraft paper from the factory against these purchase orders/ packing lists. The weighment slips and respective bilties shown to him pertain to such removal of Kraft paper from their factory. He had carefully seen the weighment slip no. 674/14.06.2015 showing removal of 15010 Kg of Kraft paper by vehicle number UP21/BN6060 along with corresponding bilty number 977 dated 14.06.2015 against which he had admitted removal of Kraft paper from the Excise Appeal Nos.70382 & 70397 of 2023 14 factory and the hand-written parchi on which 14.06.2015 15010 Kg UP21/BN6060" was written by pen and accepted that the said parchi was prepared in the factory on the basis of the weighment slip. The · details recorded on the parchi means 15010 Kg of Kraft paper has been removed from the factory on vehicle no. UP21/BN6060 on 14.06.2015.
He had carefully examined weighment slips of 'Paper bearing nos. 889, 859, 643 & 900 and several hand written parchies placed at page no.7, 8, 9, 10, 14 & 15 in the file resumed frnm the factory of Appellant 1 under S. nos. 19 of Annexure B' to Panchnama dated 22.06.1205 and agreed that these weighment slips and hand- written parchies pertain to removal of Kraft paper from the factory of Appellant 1 on different dates showing quantity of Kraft paper removed and respective vehicle number on which it was removed.
He had carefully examined Purchase Orders bearing nos. M-234, J-10, J- 11, J-30, J-32, J-37, J-72, J-81 to J-83, J- 85, J-90 to J-95, J-97, J-100, J-106, J- 108, J-109, J-111, J-113, J-114, J-115, J-118, J-119to J-121, J-123, J-126, J- 127, J-131 & J-136 placed in the file resumed from the factory premises of Appellant 1 under sl nos. 27 of Annexure 'B' to Panchnama dated 22.06.2015 suggesting removal of Kraft paper against these orders as the same were not destroyed and corresponding weighment slips of 'Paper' and handwritten parchies resumed from office of Appellant 1 under sl.no. 53 of Annexure- 'A' to the Panchnama dated 22.06.2015 & the factory of Appellant 1 under st.no. 19 of Annexure- 'B' to the Panchnama dated 22.06.2015 confirming removal against these purchase orders. He had also seen the noting's made at page no. 200, 201 and 204 of the documents resumed from factory under sl.no. 27 of Annexure-'B' to Panchnama dated 22.06.2015 further confirming removal against these purchase orders Excise Appeal Nos.70382 & 70397 of 2023 15 2.20 In connection with the investigation of the case, the sorted-out torn documents/ papers kept In a sealed yellow coloured envelope under panchnama dated 18.09.15 after segregation from the torn papers resumed from the office premises of Hit. under sl.no. 53 of panchnama dated 22.06.15, were again segregated & listed in the presence of Appellant 2 under Panchnama dated 15.02.2018. Duringpanchnama proceedings dated 15.02.2018, the torn papers/ slips kept in the sealed yellow coloured envelope were segregated and which found meaningful were shown to Appellant 2. After perusal of these torn papers/slips, Shri Gupta explained that these paper/ slips were related to the purchase/ receipt of waste paper andafter taking into account the receipt of said waste papers, these slips were destroyed. He assured to certify receipt of waste paper under these slips from their waste paper record. A Chart showing date wise detail of these torn slips was also prepared during the said proceedings for further scrutiny, which was signed by him.
2.21 During statement dated 07.03.2018, when asked about the purchase bills of the aforesaid torn receipts of waste paper, Appellant 2 provided purchase detail of accounted for waste paper receipts in the Chart Itself; and, in Ans. No.11, stated that purchases against only some receipts had been accounted for in the records. He further stated that purchase of waste paper pertaining to the other torn receipts had been made out of the books for utilization In manufacture of kraft paper meant for clandestine removal. Stock of waste paper found In excess of book balance during physical verification at the time of search was due to such purchases.
2.22 The total Central Excise Duty not paid/short paid by Appellant 1 on different issues detected has been summarized as below:-
N Issue Period Chart/ Central Excise Duty Short paid/ not paid
o Involved Annexure
quantifying CENVAT Ed Cess SHE Cess Paper Total
the duty Cess
Excise Appeal Nos.70382 & 70397 of 2023
16
1 Clandestin Septemb Annexure 1 132353.43 0 0 2757.36 135110.79
e Removal er 2014
of Kraft to March Annexure 2 115041.71 2300.84 1150.42 2396.70 120889.67
Paper 2015 Annexure 3 67946.28 0 0 1415.55 69361.83
Annexure 4 1937402.46 435.6 217.8 40362.50 1978418.36
2 Clandestin June 74827.00 0 0 0 74827.00
e removal 2015
of HDPE
fabric
3 Undervalua June Annexure 5 29156.19 583.12 291.56 607.42 30638.29
tion of 2013 to (a)
Kraft Paper June
Paper sold 2017 Annexure 5 9795.82 195.92 97.96 204.08 10293.78
from the (b)
premises Annexure 5 163895.72 3277.91 1638.96 3414.49 172227.08
of (c)
Consignme
nt Agents Annexure 5 148082.65 2755.29 1377.65 3085.06 155300.65
(d)
Annexure 5 222481.22 0 0 4635.03 227116.25
(e)
Annexure 5 (f) 354841.79 0 0 7392.54 362234.33
Annexure 5 111086.20 0 0 2314.30 113400.5
(g)
4 CENVAT May Chart provided 313226.00 3962.00 1968.00 0 319156.00
Credit on 2013 to by Appellant 1
GTA June vide letter
services 2017 dated
taken for 22.03.2018
outward
freights
5 Suppressio June 2312.16 46.24 26.12 48.17 2432.69
n of 2013
Invoice
Value in
ER-1 of
June 2013
Total 3682448.63 13556.92 6768.47 68633.2 3771407.22
2.23 A Show Cause Notice dated 07.06.2018 was issued to the Appellant 1 and appellant 2 to show cause as to why-
(i) the Central Excise duty (including cess) amounting to Rs.33,77,422/- not paid/ short paid on clandestine removal of kraft paper, clearances of kraft paper sold from the premises of consignment agents and clearances of kraft paper less shown in the ER-1 return for the month of June. 2013, should not be demanded & recovered from them under Section 11A (4) of the Central Excise Act, 1944; and since they have already deposited Rs.25,00,000/- towards central excise duty during investigation, the same should not be appropriated against the confirmed dues;
(ii) the cenvat credit of service tax paid by them in respect of GTA services used for transportation kraft paper from Excise Appeal Nos.70382 & 70397 of 2023 17 factory of manufacture up to place of customer in F.O.R. sales, amounting to Rs.3,19,176taken and utilized wrongly, should not be demanded & recovered from them under section 11A (4) of the Centrai Excise Act.
1944 read with Rule 14 of the Cenvat Credit Rules. 2004;
(iii) the amount of Rs.74,827/- (Rupees Seventy Four Thousand Eight Hundred Twenty Seven) not paid on clandestine removal of HDPE fabric 'as such', should not be demanded & recovered from them under section 11A (4) of the Act, read with Rule 14 of the Cenvat Credit Rules. 2004;
(iv) Interest under section 11AA of the Central Excise Act.
1944 payable at the rates fixed by the Central
Government on the Central Excise duty of
Rs.33,77,422/- not paid/ short paid on removal of kraft paper, Cenvat credit of Rs.3,19,176/- taken & utilized wrongly and amount of Rs.74,827/- not paid on removal of HDPE fabric, for the period of delay should not be demanded & recovered from them;
(v) penalty should not be imposed upon them under the provisions of rule 25 of the Central Excise Rules, 2002 and rule 15 of the Cenvat Credit Rules, 2004 read with section 11 AC of the Act for the reasons discussed In para-34 above.
(vi) penalty should not be imposed upon Appellant 2 under rule 26 (1) of the Central Excise Rules, 2002.
2.24 The show cause notice has been adjudicated by the original authority as per order in original referred in para 1 above.
2.25 Aggrieved appellants filed appeals before the Commissioner (Appeals), which have been dismissed as per the impugned order referred to in Para 1 above.
2.26 Aggrieved appellants have filed these two appeals.
Excise Appeal Nos.70382 & 70397 of 2023 18 3.1 I have heard Shri Amit Awasthi, Advocate for the appellants and Shri Santosh Kumar, Authorized Representative for the revenue.
3.2 Arguing for the appellants learned counsel submits that:
the whole case made out against the Appellants is entirely based on unwarranted and unsubstantiated assumptions and inferences drawn from loose private documents, allegedly recovered by the officer from Computer and hard discs, without following the norms carved out for admissibility thereof and on untested and involuntary statement of the Appellant No. 2, which were drawn during the alleged investigation against the Appellants. The said documentary evidence evidently, in the form of loose document/ scanned copy, shown to be recovered, from office of the Appellant No. 1 as well as from the residential premise of the Appellant No. 2, has no legal tenability. Moreover, the Learned Adjudicating Authority in utter disregard of principal of judicial discipline, has flouted dicta of higher forum and has proceeded in a prejudiced manner to any how saddle an artificial liability upon the Appellants in absence of any positive, affirmative and corroborative evidence;
the authenticity and genuineness of all such loose and computer documents has not been properly ascertained and verified, as the Author of these loose documents have neither been identified, which is evident from the statement of Appellant No. 2 and presuming though not admitting any liability, if any author of the loose documents have been identified by the Respondent, however no statement has been recorded from them to confirm the contents of these privately prepared documents or to ascertain the nature, accuracy and truth of the entries contained therein, and under whose direction and control these documents were created and for what purpose, which has not been established till date. The Excise Appeal Nos.70382 & 70397 of 2023 19 Appellants have at no, stage and nowhere owned up these private documents as official or unofficial records of the Appellant No. 1 company having been prepared and maintained under instructions, control, supervision or even knowledge of any senior executive of the Appellant No. 1; there is absolutely no tangible evidence of suppression of production and/or clandestine removal of finished goods. The evidence relied upon in the case to support the allegations as leveled is either inadmissible or utterly lacking corroboration and is unable to stand on its legs independently, through reliable, materially affirmative and tangible evidences;
process of manufacturing involves the primary raw material in addition to waste paper, in electricity and steam, further the product cannot be brought to the level of being marketed without Core Pipes and HDPE bags, and before, taking the allegations as gospel truth, though not admitting, if the department proceeds on such flimsy ground of creation of liabilities, on such weak and secondary evidences, lacking legal tenability, it is a must for the Department, to show surreptitious procurement of all the raw material, along with excess consumption of electricity, clandestine receipt of raw husk for generation of steam and the operation of boiler, and last but not the least, the transportation of all the material and the operation of the boiler happens to be monitored by a proper Inspector of the Boiler, wherein the entire line of the boiler along with the nozzle point of dissemination, is strictly under supervision of the Department, which monitors and mandate the use of boiler (involving human safety), and time bond generation of steam, without which it is impossible even to comprehend any manufacture of craft paper;
on ocular examination of the documents shown to be scanned computer printouts for want of investigation and on the ground of the maintainability, the subjected Excise Appeal Nos.70382 & 70397 of 2023 20 document holds no ground to be admissible as an evidence and last but not the least, even on the day on which the purported data was retrieved, the Department never bothered to take any signatures on the said retrieved data, which creates a doubt on the subjected documents, which lacks legal tenability and is not in conformity with the provisions of law and is liable to be dismissed in-limine; there is total lack of positive, tangible evidence to corroborate the sale of finished goods and there is no iota of evidence of any investigation either from the transporter or from the power consumption board;.
to prove the charge of clandestine removal, it is not the quantity, but the qualitative evidence that is corroboration and is unable to stand on its legs independently, through reliable, materially affirmative and tangible evidences; Penalty imposed on Appellant No.2 is not justified; Demand of penalties and interest is not justified; Reliance is placed on the case laws as follows:-
o Devilal/Babulal Vs State of Rajasthan 2019 (19) SCC 447;
o Shri Radhey Radhey Ispat Pvt. Ltd. Final Order No.70020-70022 of 2025 dated 16.01.2025. o Sigma Casting Pvt. Ltd. Vs CCE, Lucknow Final Order No.70932-70933/2024 dated 08.10.2024.
o Kundan Casting Pvt. Ltd. Vs CCE Lucknow Final Order No.70923-70924/2024 Dated 08.10.2024. o M/s Raghunath International Ltd. Vs CCE Kanpur Final order No.70056-70059 of 2022 dated 18.01.2022, this order of the Tribunal has been appealed before Hon'ble Allahabad High Court on a question of law under Central Excise Act erstwhile and that has been settled and accepted.
o M/s Continental Cement Co. Vs UOI 2014 (309) ELT 411 (All).
Excise Appeal Nos.70382 & 70397 of 2023 21 3.3 Authorized Representative reiterated the findings recorded in the impugned order.
4.1 I have considered the impugned order along with the submissions made in appeal and during the course of arguments.
4.2 Impugned order records the findings as follows:
"5.3 I find that the appellant has contended that searches taken at the premises of the factory/office/residential premises and the entire action taken and conclusions drawn therein are highly questionable and therefore creditability thereof require strict proof. They have also challenged seizures made at their premises, data-retrieval from electronic devices after search. They have also stated that statements of the Director and Accountant recorded during investigation were all along remained uncorroborated and unsubstantiated and the statement being involuntary computer typed wherein Mr. Virendra Kumar Gupta does not even know how to operate the computer, no credence can be given to such statement which are not corroborated by any tangible affirmative and credible evidence.
5.4 I find that acting on an intelligence received by DGCEI (now DGGI) that. Appellant 1 was indulged in purchasing mostly unaccounted waste paper (basic raw material) in the shape of old & discarded corrugated boxes & other paper scrap and on cash payment basis; and they were also removing M. G. Kraft paper clandestinely under fake & parallel Invoices without payment of duty, which were finally destroyed after such clearances and connived with suppliers/buyers of the M.G. Kraft paper. Thus, there is no doubt that searches were made by the officers of DGGI under search warrants issued by the Additional Director General, Lucknow Zonal Unit. Lucknow, at various business/ residential premises related to company/ directors, only on the basis of intelligence received and under proper Authorization to search issued by the competent authority.
Excise Appeal Nos.70382 & 70397 of 2023 22 Comparison of stock of goods physically verified on 22.06.15 and the book balances as on 22.06.15 as provided by the party, revealed an excess in stock of goods of 51.523 MT of M.G. Kraft Paper and shortage of 5050.8 Kg of HDPE Roll from its book balances. The stock physically verified was detained under the said panchnama dated 22.06.2015. As the appellant have themselves provided balance position of stock which was different from stock position recorded during search, hence the excess/shortage recorded therein cannot be denied.
5.5 The panchnama were drawn in presence of pancha witnesses, which were duly signed by the officer and also by the Director. Therefore, the search proceedings were made in presence of independent witnesses and the same cannot be challenged by the appellant at this stage. APPELLANT 1 vide letter dated 09.07.2015 have admitted the duty liability and intimated deposit of Rs.15,00,000/- and Rs. 10,00,000/- respectively vide Challan Nos. 90425 dated 29.06.2015, 90429 dated 29.06.2015 and 90152 dated 08.07.2015 against central excise duty.
5.6 I further find that 02 CPUs resumed from factory premises of Appellant 1 and the 03 external hard disks resumed from residence of Shri Virendra Kumar Gupta, Director of Appellant 1 was done and placed in one external hard disk bearing P/N WDBUZGSOOOABK-03 by the computer expert under Panchnama dated 02.09.2015 and 18.09.2015 respectively, in presence of Shri Virendra Kumar Gupta. On 23.03.2017, in connection with investigation, printouts of data placed in external hard disk bearing P/N WDBUZGSOOOABK-03 prima-facie appearing relevant was taken under Panchnama dated 23.03.2017. Shri Virendra Kumar Gupta had verified the Chart and found as per the said documents & correct. He has put his dated signature on the chart in token of his satisfaction regarding its correctness. Further the data stored in the said devices Excise Appeal Nos.70382 & 70397 of 2023 23 pertained to the appellant factory. The denial of cross- examination would not vitiate the proceedings and recovery of computer and data storage devices. Thus, the plea put forth by the appellant 5.7 I find that the page no. 17 & 18 of print-outs taken under panchnama dated 23.03.17 which were scanned copies of writings contained date wise entries of Kraft paper removed from the factory detailing quantity of Kraft paper removed, name of consignee and total amount payable by the buyer. For example, first entry noted on 10.01.15 at page no. 17 written as "10/1/ GM 3713K 16 105687/- 3713° means 3713 Kg of Kraft paper of 16 BF was removed to G.M. Paper Products Co. Pvt Ltd. for total amount of Rs. 1,05,687/- under commission of Rs.3713/-. Similarly, entry noted on 28.01.15 at page no. 17 written as "28/1/ GM 13467 18 383327/-13467/-" means 13467 Kg of Kraft paper of 18 BF was removed to G.M. Paper Products Co. Pvt. Ltd. for total amount of Rs. 3,83,327/- under commission of Rs. 13467/-. Out of the removals of Kraft paper mentioned in the aforesaid print-outs, the removals on 12.01.2015, 29.01.2015, 07.02.2015, 12.02.2015, 14.02.2015, 16.02.2015, 24.02.2015 and 27.02.2015 were made without issuing any invoice and no duty had been paid on these removals of kraft paper. The Director of the appellant accepted the liability of duty on it.
5.8 It is observed that certain loose paper slips having hand-written entries prima facie related to sales of M.G. Kraft paper were resumed from the factory premises of Appellant 1. Shri Virendra Kumar Gupta in the Statement dated 26.02.18 recorded under Section 14 of the Act, in respect of documents mentioned in the chart, has inter alia stated that:-
"He had carefully gone through the loose paper slips placed at page number 55 to 59 of the file resumed from Excise Appeal Nos.70382 & 70397 of 2023 24 the factory premises of M/s Hariom Industries Limited, Kanpur under SI No 27 of the panchnama dated 22.06.15".
5.9 Therefore, I am of the considered opinion that it is established from the record that the statements were given by the concerned persons out of their own volition and there is no allegation of threat, force, coercion, duress or pressure being utilized by the officers to extract the statements which corroborated each other.
Besides, the Director of Appellant 1 on his own volition deposited the amount of Rs.25 Lakhs towards excise duty and therefore in the facts and circumstance of the present case, thus the plea put forth by the Advocates of the appellant that the statements were recorded under compulsion and dictation and therefore inadmissible as evidence of any clandestine production and/or removal of goods cannot be accepted. This fact clearly proves that the statements of the concerned persons were of their volition and not outcome of any duress. I find that the statements tendered during investigation clearly give details of the clandestine activities of Appellant 1 and were never retracted during investigation/adjudication stage.
5.10 Thus, the documents recovered from the said storage devices and computer could not be discarded only on the ground that mandate of Section 36B was not followed before obtaining the data from the said devices. Cross- examination is not the absolute right of the appellant and it is not necessary to allow the cross-examination of all the witnesses. The statements recorded under Section 14 of the Act, referred to under Section 9D of the Act are ex facie admissible in evidence as has been held by the Supreme Court in the case of Duncan Agro Industries (supra) and, therefore, such statements are not covered by the principle of exclusion of hearsay evidence and cross examination of Excise Appeal Nos.70382 & 70397 of 2023 25 witnesses is not necessary in each and every case. These statements, relied upon in the instant case, are primarily based on documentary evidences collected/seized during investigations and, therefore, are relevant also in terms of provisions under Section 32(2) of the Evidence Act. The facts stated therein do not necessarily require the test of cross examination.
5.11 I find that the Statement of Shri Virendra Kumar Gupta, Director of Appellant 1 was recorded under Section 14 of the Act vide summons dated 13.07.15, wherein he stated that Shri Sudhanshu Dixit, accountant was issuing the invoices pertaining to Appellant 1. All the invoices were issued as per the directions given by him in his statement dated 20.07.15, Shri Sudhansu Dixit S/o Shri Durga Shankar Dixit, Accountant in his statement dated 18.11.15, recorded under Section 14 of the Central Excise Act, 1944, has also accepted that he was doing billing work in APPELLANT 1 during the period May, 2015 to July, 2015. As regard the billing process adopted In the factory, he stated that excise invoices were prepared by him on the computer as per the details and orders given by Shri Virendra Kumar Gupta, Director of Appellant 1.
5.12 I also observe that Appellant 1 vide their letter Ref. No. HOIL/15-16/25 dated 30.06.2015 and HOIL/15-16/41 dated 09.07.2015 had admitted the fact of clandestine clearance of excisable goods and therefore has voluntarily come forward to sort out the issue and to pay the Central Excise duty liability and that party has paid Central Excise duty voluntarily under TR6 Challans totalling to Rs.25,00,000/- on various dates.
5.13 I find that Appellant 1 was issuing parallel invoices for clandestine removal of kraft paper against some purchase orders booked by them which has been elaborated in detail in the para No 20 to 23 of the impugned order Excise Appeal Nos.70382 & 70397 of 2023 26 which is collaborated with removal of kraft paper under fake/ parallel Invoices or without any Invoice as detailed in Chart No. 01, 02, 03 and 04. Therefore, I observe that the issue with regard to the clandestine removal of excisable goods by Appellant 1 from their premises is clearly proved from the materials on record. Thus, I hold that Appellant 1 are liable to pay Central Excise duty of Rs. 23,03,781/- on the value of kraft paper removed clandestinely. Though Shri Virendra Kumar Gupta, Director of Appellant 1 accepted the liability of duty on such removals but the appellant have not paid any duty on it.
5.14 From the facts mentioned above, it appears that shortage of 5050.8 Kg of HDPE fabric from book balance, detected during physical verification of stock available in the factory premises of Ms HIL on 22.06.15, due to its clearances 'as such' without issuing any invoice. Thus, in terms of provisions of Rule 3(5) of the Cenvat Credit Rules. 2004, Appellant 1 are required to pay an amount equal to cenvat credit of Rs. 74827/- availed on the short quantity of HDPE fabric valued at Rs.5,98,614/- as per Purchase Invoice no. 150 dated 04.06.15, but the party did not pay the same.
5.14.1 I find that the decision of the Hon'ble High Court of Allahabad in the case of Bajrang Petro Chemicals (P) Ltd. vs. Commr. of C. Ex., Kanpur reported in 2015 (317) E.L.T. 243 (All.), is squarely applicable to the facts of the present case. In this case, the Hon'ble High Court of Allahabad held, as under:
Penalty - Clandestine removal - Huge shortage of finished goods for which no explanation was offered by appellant at the time of stock checking Appellant was unable to give any suitable explanation for shortage of finished goods - Thus, appellant admitted that goods found short had been removed without payment of duty Method for clandestinely Excise Appeal Nos.70382 & 70397 of 2023 27 removal of goods not required to be explained - Provisions of Section 11AC of Central Excise Act, 1944 and Rule 26 of Central Excise Rules, 2002 for levy of penalty on authorized signatory would be attracted. [paras 10, 11] 5.14.2 I also find that in a similar case, the Hon'ble High Court of Madras in the case of Goyal Ispat Ltd. reported as 2015 (324) E.L.T. 392 (Mad.), held, as under:
Demand Clandestine removal - Evidence - Stock taking conducted on eye estimation whether fatal to the case of Department - Order of Tribunal not on the basis of visual inspection, but based on mahazar records recording the shortage of goods which has been done in the presence of independent witnesses and such shortage was supported by unretracted statement of Manager of assessee company - Thus non-recording of the correct quantity of goods in the statutory records, viz. RG-1 register maintained by assessee establishes the case for demand of duty, more so in a case of statement accepting Central Excise violation Issue being pure questions of fact, Tribunal is correct in confirming the order of adjudicating authority - Section 11A of Central Excise Act, 1944. [paras 9, 10] 4.15. I find that as per Sections 4(3)(c)(iii) and 4(3)(cc) of the Act, in case of sale from premises of consignment agent, the place of consignment agent will be the 'place of removal' and 'time of removal' shall be deemed the time at which the goods are cleared from factory. Further, as per Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000; in the case of sales of excisable goods from premises of a consignment agent after their clearance from the place of removal, the value under Section-4 ibid shall be the normal transaction value of such goods sold from the premises of the consignment agent at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to Excise Appeal Nos.70382 & 70397 of 2023 28 the time of removal of goods under assessment. From the Charts supplied by the appellant vide their letter dated 22.03.2018, it is clear that in most of the removals of Kraft paper, Appellant 1 has paid duty at a value lower than the transaction value of kraft paper sold from the premises of the consignment agent at or about the same time or at the time nearest to the time of removal of goods under assessment. Thus, from the foregoing, I hold that Appellant 1 has short paid duty of Rs. 10,71,211/- on the differential value in cases of removals of Kraft paper sold from premises of consignment agents and have resorted to undervaluation in cases of sales of kraft paper from the premises of consignment agents.
5.16 As per Rule 2(f) of the Cenvat Credit Rules, 2004, "input service" means any service used by a manufacturer in or in relation to the manufacture of final products and clearance of final products up to the place of removal and includes services used in relation to and outward transportation up to the place of removal. The Apex Court in the case of CCE v. Ispat Industries Ltd. (2015) 324 ELT 670 (SC) has ruled that 'Place of Removal' as defined under section 4(3)(c) of the Act must be referable to manufacturer, place of buyer cannot be 'place of removal'. In view of parallel definition of 'place of removal under Rule 2(ga) of Cenvat Credit Rules, GTA services used by manufacturer for transportation of final products from factory of manufacturer up to the place of customer does not fall under the ambit of "Input service"; and, therefore, in terms of rule 3(1) of the Cenvat Credit Rules, 2004, cenvat credit of service tax paid by the manufacturer under reverse charge on outward freight for transportation of final products from factory to place of customer is not available to manufacturer. In view of above, I hold that Appellant 1 was not eligible for cenvat credit of service of Rs 3,19,176/-
tax paid by them on outward freight in cases of FOR sales Excise Appeal Nos.70382 & 70397 of 2023 29 and has wrongly taken CENVAT credit of service tax paid by them in respect of GTA services under reverse charge on outward freight paid by them in case of F.O.R. sales (excluding consignment sales) during 2013-14 to 2017-18 (up to June, 2017) detail of which has been provided by them in the Charts submitted vide their letter dated 22.03.18.
5.17 I place reliance on the Hon'ble Supreme Court judgment in the case Commissioner of Central Excise and S.T. versus Ultra Tech Cement Ltd reported in 2018 (9) G.S.T.L. 337 (S.C.) which has been affirmed in 2018 (13) GSTL J101 (Supreme Court) Cenvat credit - Input service - Goods Transport Agency service - Used for transport of goods from place of removal to buyer's premises - HELD : Assessee was not entitled to credit - In definition of input service in Rule 2(l) of Cenvat Credit Rules, 2004 from place of removal' has been replaced in 2008 by 'upto place of removal' - 'From' was the indicator of starting point, and 'upto' signifies terminating point - C.B.E. & C. Circular No. 97/8/2007-S.T., dated 23-8-2017 had not dealt with this change, and its application to post- amendment cases would violate Rule 2(1) of Cenvat Credit Rules, 2004 - However, vide amendment carried out in the aforesaid Rules in the year 2008, which became effective from March 1, 2008, the word 'from' is replaced by the word 'upto'. Thus, it is only 'upto the place of removal' that service is treated as input service. This amendment has changed the entire scenario. The benefit which was admissible even beyond the place of removal now gets terminated at the place of removal and doors to the Cenvat credit of input tax paid gets closed at that place. This credit cannot travel therefrom. It becomes clear from the bare reading of this amended Rule, which applies to the period in question that the Goods Transport Agency service used for the purpose of outward transportation of goods, i.e., from Excise Appeal Nos.70382 & 70397 of 2023 30 the factory to customer's premises, is not covered within the ambit of Rule 2(1)(i) of Cenvat Credit Rules, 2004. Whereas the word from' is the indicator of starting point, the expression 'upto' signifies the terminating point, putting an end to the transport journey. We, therefore, find that the Adjudicating Authority was right in interpreting Rule 2(1). [paras 6, 7, 8, 9, 10, 11, 12, 13] 5.18 I find that as per Rule 4 of the Central Excise Rules, 2002, every manufacturer of excisable goods is required to pay the duty leviable on such goods in the manner provided in rule 8 and no excisable goods, on which any duty is payable, should be removed without payment of duty from the place where they are manufactured, unless otherwise provided. The appellant instead of showing invoice value of clearances of the month have shown less value after adjusting the value of returned goods and paid duty on the adjusted value only in the ER-1 returns for the month of June. 2013. Apparently Ms HIL has not paid duty on the removals of the Kraft paper of the month of June' 2013 having value equal to value of returned goods. Thus, I find that the appellant have suppressed the invoice value in the month of June'13 and are required to pay short paid duty of Rs. 2430/-.
5.19 Thus in view of the foregoings paras 5.13 to 5.18 above, the appellant is required topay the Central Excise duty of Rs. 37,71,425/-
(2303781+74827+1071211+319176 +2430).
5.20 On the issue whether the extended period of limitation was invocable for the demands of duty, I observe that when the Department alleged suppression of facts and clandestine removal of their final products against the appellant in the show cause notice, the burden was on the latter to disprove the allegation by bringing in documentary evidence of sufficient facts and informations having been furnished to Excise Appeal Nos.70382 & 70397 of 2023 31 the Department with regard to the manufacture and removal of the goods during the relevant periods. No such evidence was adduced by the appellant. Appellant 1 have suppressed the material facts of (i) removal of their finished goods(Kraft paper) without issuing invoices or under parallel invoices, (ii) removal of HDPE fabric (input on which they had taken cenvat credit) found short as such without issuing any invoices, (iii) Undervaluation of kraft Paper removed for sale from Premises of their consignment agents, (iv) CENVAT credit of service tax paid on outward in case of FOR sales of kraft paper taken & utilized wrongly & (v) suppression of invoice value in ER- 1 of June' 2013. They have also suppressed and mis-stated the purchase and and consumption of waste paper and manufacture and removal of kraft paper in the respective stock registers. Thus, the appellant have not paid/short paid duty by the reason of suppression of facts, willful mis-statement and deliberate contravention of the provisions of the Act and rules made thereunder with the clear intent to evade payment of Central Excise duty. Suppression of facts and mis-statement and evasion of duty would have never come to notice of the department if the investigation was not done. Therefore the ingredients of Section 11A(4) of the Act for invoking the extended period of limitation is justified and the demands of duty is not hit by limitation. I also find that the allegation of suppression of facts has not been successfully negatived by the appellant. In the present case therefore the extended period of limitation would be available as there was suppression of facts by the respondents with the Intention to evade the Central Excise.
5.21 It is also observed that the appellant in their appeal have relied upon a number of decisions, to show that there was no suppression of facts or mala fide intention. However, they have not given any justification as to how these decisions are applicable to the facts of their case, especially Excise Appeal Nos.70382 & 70397 of 2023 32 when circumstances, transactions, events of each case, are required to be considered, analyzed and weighed against the circumstances et al to be the same in the referred cases. I also find that the Hon'ble Supreme Court in the case of Punjab National Bank vs. R.L. Vaid 2004 (172) E.L.T. 24 (S.C.), has held at Para 5, as under:
"5. We find that the High Court has merely referred to the decision in R.K. Jain's case (supra) without even indicating as to applicability of the said decision and as to how it has any relevance to the facts of the case. It would have been proper for the High Court to indicate the reasons and also to spell out clearly as to the applicability of the decision to the facts of the case. There is always peril in treating the words of a judgment as though they are words in a Legislative enactment and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case. Circumstantial flexibility, one additional or different fact may make a difference between conclusions in two cases."
5.22 Similarly, the Hon'ble Supreme Court in the case of CCE, Bangalore vs. Srikumar Agencies 2008 (232) E.L.T. 577 (S.C.), inter alia, held, as under:
"Precedents - Court decision not statute - Reliance thereon without discussion of facts - Decisions not to be relied upon without discussing similarity of facts - Judgments of courts not to be construed as statutes Circumstantial flexibility, additional or different fact may make a world of difference between conclusions in two cases."
5.23 On examining the facts of the instant case in terms of Section 11AA of the Act, I find that where any amount is payable as tax but not paid/paid belatedly, it results in financial loss to the exchequer and corresponding financial Excise Appeal Nos.70382 & 70397 of 2023 33 gain to the assessee. Therefore, if the Central Excise duty has been short paid/ not paid beyond the due date, interest is chargeable in terms of statutory provisions mentioned above. Therefore, I find that in this case, the demand/ recovery of interest on Central Excise duty under Section 11AA of the Act, has correctly been ordered by the Adjudicating Authority.
5.24 Further, I find that they have attracted penal action for the reasons given below that:-
(i) They removed their finished goods(Kraft paper) without issuing invoices or under parallel invoices in contravention of the provisions of rules 4,6,8 & 11 of the Central Excise Rules 2002,
(ii) They short/not paid excise duty on kraft paper by reasons of suppression of facts in contravention of Rule 4(3)(c)(iii) read with Rule 7 of the Central Excise Valuation(Determination of price of Excisable goods) Rules, 2000.
(iii) They availed wrong CENVAT credit of service tax paid on outward in case of FOR sales of kraft paper in contravention of the provisions of 3(1) of the Cenvat Credit Rules, 2004 with intent to evade payment of duty,
(iv) They removal of HDPE fabric (input on which they had taken cenvat. credit) found short of the provisions of 3(5) of the Cenvat Credit Rules, 2004 with intent to evade payment of duty as such without issuing any invoices in contravention taken & utilized wrongly.
Thus, I find they have rendered themselves liable to penal action under Rule 25 of the Central Excise Rules, 2002 and Rule 15 of the Cenvat Credit Rules, 2004 read with section 11 AC of Act for violation of the above mentioned of statutory provisions.
Excise Appeal Nos.70382 & 70397 of 2023 34
6. Now, I take up the appeal of the appellant No. 2. He has submitted that in the present appeal, imposition of personal penalty under Rule 26 of Central Excise Rules,2002 on him as Director of Appellant 1 is unjustified.
6.1 I find that due to various acts of commission or omission of Appellant 1, as discussed above, the goods removed by them in contravention of provisions of rules 4, 6, 8 and 11 of the Central Excise Rules, 2002 with intent to evade payment duty were liable to confiscation under rule 25 of the Rules, ibid. At the time of such contravention, Shri Virendra Kumar Gupta was the Director of Appellant 1 and, thus, was responsible to the company for the conduct of business. In the statement dated 20.07.15, recorded under Section 14 of the Act, Shri Virendra Kumar Gupta admitted that he was looking after all works of the unit. Purchase Orders were generated by him and all the invoices were issued as per the directions given by him. From the above, Shri Virendra Kumar Gupta was personally and knowingly involved in the evasion of central excise duty by his company and has definite role in the said offences making the offended goods liable to confiscation.
6.2 In his statement dated 18.11.2015, recorded under Section 14 of the Act, Shri Sudhansu Dixit S/o Shri Durga Shankar Dixit, has interalia accepted that he was doing billing work in Appellant 1 during the period May, 2015 to July, 2015. As regard the billing process adopted in the factory, he stated that excise invoices were prepared by him on the computer as per the details and orders given by Virendra Kumar Gupta, Director of Appellant 1. After loading of the goods, the Invoices prepared were printed and the four copies of the Invoices were sent to Shri Virendra Kumar Gupta for his signature. On being asked about the parallel invoices resumed from residence of Virendra Kumar Gupta during search on 22.06.15, he stated that the said Invoices were prepared & printed by him under the directions of Shri Excise Appeal Nos.70382 & 70397 of 2023 35 Virendra Kumar Gupta. After editing invoices, other invoices of the same serial numbers in the name of different parties were prepared by him.
6.3 I find that Sl. No 3.3 on serially numbering of invoices as per Chapter 4 of Excise Manual of Supplementary Instructions provides that in case of computer generated invoices, the serial number may be allowed to be generated and printed by the computer at the time of printing at the time of preparation of invoice only. Only if the software is such that computer automatically generates the number and the same number cannot be generated more than once. Thus, preparing pararell invoices, editing invoices was being done under the directions of Shri Shri Virendra Kumar Gupta and the same was sent to him for his signature.
6.4 I find that duplicate invoices kept in his bag were recovered from his residence. Out of the removals of Kraft paper mentioned in the page no. 17 & 18 of print-outs taken under panchnama dated 23.03.17 the removals on 12.01.2015, 29.01.2015, 07.02.2015, 12.02.2015, 14.02.2015, 16.02.2015, 24.02.2015 and 27.02.2015 were made without issuing any invoice and no duty had been paid on these removals of kraft paper. He accepted the liability of duty on it.
6.5 In his statement dated 07.03.18 recorded under Section 14 of the Act, in respect of documents mentioned in the Chart (No.04), Shri Virendra Kumar Gupta, Director (Appellant No.2) has inter alia stated that:-
He had seen all the six weighment slips of 'Paper' issued by dharamkanta bearing nos. 766, 595, 773, 768, 717 and 841 containing gross, tare & net weight of loaded vehicle, vehicle number and date & time of weighment of empty & loaded vehicle and admitted that the aforesaid weighment slips pertain to removals of Kraft paper from the factory of Appellant 1.
Excise Appeal Nos.70382 & 70397 of 2023 36 He had carefully seen the welghment slip no. 674/14.06.2015 showing removal of 15010 Kg of Kraft paper by vehicle number UP21/BN6060 along with corresponding bilty number 977 dated 14.06.2015 against which he had admitted removal of Kraft paper from the factory and the hand-written parchi on which "14.06.2015 15010 Kg UP21/BN6060"
was written by pen and accepted that the said parchi was prepared in the factory on the basis of the welghment slip. The details recorded on the parchi means 15010 Kg of Kraft paper has been removed from the factory on vehicle no. UP21/BN6060 on 14.06.2015.
6.6 In view of the above, I hold that Shri Virendra Kumar Gupta is liable to penal action under Rule 26 (1) of the Central Excise Rules, 2002, as he has admitted in his confessional statements recorded under Section 14 of the Act, that he was engaged in day-to-day business of the appellant No. 1 Appellant 1 and accepted his role and various modus operandi adopted in the clandestine removal of the kraft paper by way of issuing parallel invoices etc. 6.7 I find that the Cestat, Ahmedabad in the case of R.A. Shaikh Paper Mills Pvt. Ltd. Versus Commissioner of C. Ex., Daman reported in 2009 (238) E.L.T. 125 (Tri. Ahmd.) has held that in the case of clandestine removal, penalty is imposable on the Director actively involved in such activities:-
"Clandestine removal - Proof - Parallel set of invoice books, delivery challans and note books - Duty liability based on parallel Central Excise invoices not disputed - Contention that in respect of delivery challans, not all consignees admitted having received goods - When clandestine activities at large scale undertaken, part of which stand admitted by them and another part proved Excise Appeal Nos.70382 & 70397 of 2023 37 by Revenue, mere non-recording of statements of some consignees will not weaken Revenue's case - When some entries in delivery challan and note books stand proved, other entries may not be proved to the extent of beyond doubt - Section 11A of Central Excise Act, 1944 - Rule 4 of Central Excise Rules, 2002. - The entries made in the note books and the delivery challans stand fully corroborated by the statements of various persons including the statements of the consignees as reflected in the said records, the other entries reflected in the same records and showing the some modus operandi are required to be held as reflecting the true state of affairs and it cannot be held that each and every entry is required to be proved by production of sufficient evidence. When it stands established that the entries made in the delivery challan and note books are in respect of clandestine activities and when some of the entries from the same very note books stand proved, the same will lead to a inevitable conclusion that the other entries though may not be proved to the extent of beyond doubt, relate to clandestine removals only. [para 8] Penalty - Personal penalty on Directors - Clandestine clearances effected under directions of two Directors who actively involved in such activities - Penalty upon them in terms of Rule 209A of erstwhile Central Excise Rules, 1944 called for - Rule 26 of Central Excise Rules, 2002. [para 11]"
4.3 From the above it is evident that the entire case of the department against the appellant is based on the certain documents recovered during the course of search of factory and office premises of the appellant 1 and residential premises of the appellant 2. During the course of investigation self incriminating and admission statements of the appellant 2 were recorded in respect of the these documents to proceed against the Excise Appeal Nos.70382 & 70397 of 2023 38 appellants. However from the facts as recorded in the show cause notice and the orders of lower authorities it appears that no independent corroboration was made even on sample basis in respect of the these documents recovered/ resumed/ provided by the Appellant 1 and Appellant during the search of their premises and during the investigation. Undisputedly premises of certainsuppliers of waste paper, consignment agents, traders of the appellant and also their customers were searched simultaneously. However no corroborative evidences have been brought on record on the basis of such searches made. Neither any of such person have been made co-noticee in these proceedings. I find that it is settled position in law that charges of clandestine clearance etc., need to be established on the basis of sufficient and independent corroboration of the evidences recovered during the search and investigation. Reliance is placed on the decision of Hon'ble Delhi High Court in case of ASP Metal [2024 SCC Online Del 8546] holding as follows:
12. The charges of clandestine removal of goods connotes accusations of serious nature. If the charges are of serious nature, evidence should also be equally strong to substantiate the charges, and therefore, the evidence needs careful scrutiny and appreciation.
13. In criminal cases, the standard of proof as required to prove the charges in a criminal trial is "proof beyond doubt", whereas, the adjudication proceedings are in the nature of civil proceedings and not criminal proceedings and therefore, the standard of proof of civil proceedings i.e. preponderance of probability is applicable in adjudication proceedings.
14. It is equally well settled that in adjudication proceedings to establish the charge of clandestine removal and under valuation, Revenue is not required to prove the case with mathematical precision. Such charges are to be established on the basis of "preponderance of probabilities." However, Excise Appeal Nos.70382 & 70397 of 2023 39 the conclusions to be drawn are necessarily to be logical and not on the basis of presumptions and assumptions.
Suspicion, howsoever grave, cannot replace the test of proof.
15. Appellant's case is that during the course of stock verification of raw material (copper scrap), the officers found shortage of about 3500 kgs. Stock verification was questioned before the Original Authority by the respondent, contending that the assessment was based on estimation by visual survey and not by actually weighing the copper scrap. Original Authority ruled that Panchnama bore the signatures of Authorized Representative of the respondent and therefore respondent cannot question the stock verification. However, CESTAT did not accept the said view and in Para No. 6 observed as under:-
"6. The case of un-accounted clearance against the appellant- assessee was sought to be supported mainly on the basis of certain documents recovered from Shri Girish Chand and Shri Devinder Kumar Sharma, stock verification of copper scrap and statements of certain person including these two individuals. It is contented that during the course of stock verification of raw material (copper scrap) the officers found shortage of about 3500 Kgs. The methodology adopted for stock verification is questioned by the appellant- assessee. It is contended that the officers made only an estimation by visual survey and not by actual weighment. The Original authority recorded that since the authorized representative has signed the Panchnama admitting the shortage, the stock verification cannot be questioned. However, it is not clear as to whether actually a physical weighment has been made of the stock of raw-material. Admission of the authorized representative by signing the Panchnama is the sole reason recorded by the original authority to uphold the shortage of raw-
Excise Appeal Nos.70382 & 70397 of 2023 40 material. Even considering that there is such shortage, that cannot be automatically converted into a charge of un-accounted manufacture and clearance of excisable final product."
16. The mode of verification i.e. by eye estimation, if true, is no verification and no demand can be based on such eye estimation.
17. Revenue had placed strong reliance on the documents and statements of Sh. Girish Chand and Sh. Devender Kumar Sharma, stated to be the employees of the respondent-assessee. CESTAT found that Sh. Girish Chand was a labour contractor, supplying labourers to the assessee. He used to supply labourers to his various other clients also. Sh. Devender Kumar Sharma is a dealer of copper items and scrap. Assessee claimed that both of them were not its employees and had placed reliance on the salary and employees register as also their affidavits. CESTAT took note that this aspect had not been examined by the Original Authority except stating that the affidavits were filed belatedly, and therefore, cannot be considered. As regards the statements of Girish Chand and Devender Kumar Sharma, CESTAT took note of the retraction letters sent by them to the Excise authorities. The observation of the CESTAT as contained in Para No. 8 of the final order are pertinent and are reproduced below:-
"8. We note that the fact that these two are employees of the appellant-assessee could not be established with any clear supporting evidence. In-fact, the appellant- assessee produced adequate evidence to the contrary. Further, the private records maintained by Shri Girish Chand were also relied upon by the Revenue to support the claim of un-accounted manufacture and clearance of copper ingots. The appellant-assessee contested the claim, as factually untenable. The capacity of the only Excise Appeal Nos.70382 & 70397 of 2023 41 furnace with the appellant - assessee is 3.5 M.T. Each heat takes 8 to 9 hours. Even if the furnace is operated round the clock, it is not possible to have more than 3 heats in a day.
The diary maintained by Shri Girish Chand indicated in some pages four bhattis against some dates. Even five bhattis are also mentioned. Apparently, such entry cannot be taken as heat, as it is not possible to have, more than three heats per day. This puts serious question mark on the reliability of record maintained by Shri Girish Chand to support the allegation of clandestine manufacture of copper ingots. The appellant-assessee indicated that the records maintained by Shri Girish Chand as a labour contractor is with reference to number of labourers working per heat in the appellant - assessees' unit. We find that these basic facts were not examined in right prospective and commented upon by the original authority. This has significantly weakened the case of Revenue."
18. With regard to the value of retracted confession, the Hon'ble Supreme Court in the case of Vinod Solanki vs Union of India, 2009 (233) ELT 157 (SC), held that-
24. However while the Ld. Member (Technical) has recorded that each of them retracted their statements, the retractions are brushed aside by holding that the same were not only belated but were bald retractions without any evidence from which it can be inferred that there was any threat, coercion or inducement used in recording the same. I am unable to agree with this proposition. It is contrary to the law laid down by the Hon'ble Supreme Court in Vinod Solanki vs Union of India, 2009 (233) ELT 157 (SC),wherein while considering various judgments of the Hon'ble Supreme Excise Appeal Nos.70382 & 70397 of 2023 42 Court, on which reliance has been placed by Revenue, it was held that-
"34 ............... Law does not say that the accused has to prove that retraction of confession made by him was because of threat, coercion, etc. but the requirement is that it may appear to the court as such."
"35 ............ It is one thing to say that a retracted confession is used as a corroborative piece of evidence to record a finding of guilt but it is another thing to say that such a finding is arrived at only on the basis of such confession although retracted at a later stage."
"37 ............. The inference that burden of proof that he had made those statements under threat and coercion was solely on the proceedee does not rest on any legal principle. The question of the appellant's failure to discharge the burden would arise only when the burden was on him. If the burden was on the revenue, it was for it to prove the said fact. The Tribunal on its independent examination of the factual matrix placed before it did not arrive at any finding that the confession being free from any threat, inducement or force could not attract the provisions of Section 24 of the Indian Evidence Act."
19. CESTAT observed that although the Officers of the Department did get some details regarding sale of copper ingots to various buyers which was alleged to be unaccounted, however, no verification was made from any buyers. CESTAT also did not find any evidence or discussion in the Order-in-Original regarding the excess electricity consumed and labour employed, transport of unaccounted raw material as well as finished goods etc. and thus concluded that the Revenue's case is not supported by credible/cogent evidence, which may lead to an inescapable conclusion of unaccounted manufacture and clearance.
Excise Appeal Nos.70382 & 70397 of 2023 43
20. Commissioner of Central Excise Vs. Saakeen Alloys Pvt. Ltd. (2014) 308 ELT 655 (Guj.) was a case of alleged clandestine removal. The High Court pointed out that there needed to be positive evidence to establish evasion. It was observed as under:-
"In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below."
21. The Special Leave Petition filed by the Department against the said order being SLP (Civil) (CC No. 19304-07 of 2014) has been dismissed by the Supreme Court.
22. Similarly, in the case of Arya Fibres Pvt. Ltd. v. CCE, Ahmedabad-II 2014 (311) ELT 529 (Tri.-Ahmd.), the learned CESTAT discussed the entire law concerning clandestine removal and enumerated the legal position as under:
"(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
Excise Appeal Nos.70382 & 70397 of 2023 44
(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) 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."
23. As regards the dropping of the demand for unaccounted clearance of copper wire rods, CESTAT noted that on physical verification of the premises of the assessee, no rolling mill was found installed in the factory and no evidence was placed in the proceedings before the lower authority to the effect that assessee got wire rods manufactured by using some other's facility and thus, did not believe the contention of the Revenue that assessee had got the wire rods manufactured using hired labourers.
Excise Appeal Nos.70382 & 70397 of 2023 45
24. The mere fact that the respondent agreed to deposit the duty amount to avoid any kind of litigation, itself cannot be held to be the basis for confirming the duty demand against the respondent. CESTAT found that the case of unaccounted manufacture and clearance was built upon only sketchy evidence without concrete corroboration and whatever evidences formed basis for the case of Revenue, fell short of the minimum requirement of credible case of clandestine removal.
25. On a careful perusal of the reasons assigned and the case law relied upon in the impugned order, we find that the CESTAT conducted a meticulous exercise to examine and appreciate the evidence on record in the light of settled principles and came to a categoric finding that the case of unaccounted manufacture and clearance was built on sketchy evidence without any concrete corroboration and whatever evidence formed basis of the case of the Revenue fell short of the minimum requirement of credible case of clandestine removal.
26. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the premises of the respondent, we hold that the impugned order dated 08.06.2017 passed by the CESTAT does not suffer from any serious error and does not merit interference. The appeal is therefore dismissed."
4.4 Now coming to the evidences recorded in the form of the statements of Appellant 2. It is settled preposition in law the statements recorded under the provisions of Custom Act, 1962 and Central Excise Act, 1944 are reliable piece of evidence if found to be voluntary. In case of K I Pannuvy [1997 (90) ELT 241 (SC)]following was held:
"The question then is: whether the confession under Section 24 of the Evidence Act was obtained by threat, force or Excise Appeal Nos.70382 & 70397 of 2023 46 inducement etc. and thereby is inadmissible in evidence? In Vallabhdas Liladhar case (supra) the Constitution Bench had held that the statements made before the Customs authorities were used in support of the prosecution case. The admission thereunder constituted the evidence in proof of the charge. It was held at page 858 that the Customs authorities must be taken to be persons in authority under Section 24. The statements would be inadmissible in criminal trial if it is proved that they were caused by inducement, threat or promise. However, on the facts in that case it was held that the statements were not obtained by any threat. inducement or promise. The conviction on the basis of the retracted confession was upheld. The question then is:
whether by reason of the authority under the Act in particular Section 108, the statement of the appellant is inadmissible under Section 24 of the Evidence Act? In Percy Rustomji Basta V/s. The State of Maharashtra [AIR 1971 SC 1087], a Bench of two-Judges considered the question whether by reason of the recording of the evidence during the course of the inquiry under the Act the statement would be construed to be compulsive statements emanating from persons in authority so as to become inadmissible under Section 24 of the Evidence Act. In para 20 of the judgment it was held that it was not disputed that P.W. 5 who recorded the confession, was a person in authority within the Act. But the question was whether, when P.W. 5 drew the attention of the appellant to the fact that the Inquiry was a judicial proceeding to which Section 193, I.P.C. applied and that the appellant was bound to speak the truth, it could be considered to be a threat, inducement or promise emanating from a person in authority under the section. In para 24 it was considered and held that "a person summoned under Section 108 of the Act is told by the statute itself that under threat of criminal prosecution Excise Appeal Nos.70382 & 70397 of 2023 47 he is bound to speak what he knows and state it truthfully. But it must be noted that a compulsion to speak the truth, even though it may amount to a threat, emanated not from the officer who recorded the statement, but from the provisions of the statute itself. What is necessary to constitute a threat under Section 24 of the Evidence Act is that it must emanate from the person in authority. In the case before us there was no such threat emanating from P.W.5, who recorded the statement or P.W. 19, who was guiding the proceedings. On the contrary, the officers recording the statement were only doing their duty in bringing to the notice of the appellant the provisions of the statute. Even if P.W. 5 had not drawn the attention of the appellant to the fact that the inquiry conducted by him is deemed to be a judicial proceeding, to which Section 193, I.P.C. applies, the appellant was bound to speak the truth when summoned under Section 108 of the Act with the added risk of being prosecuted, if he gave false evidence." it was further held that "it is not every threat, inducement or promise even emanating from the person in authority that is hit by Section 24 of the Evidence Act. In order to attract the bar, it has to be such an inducement, threat or promise, which should lead the accused to suppose that "by making it he would gain any advantage or avoid any evil of temporal nature in reference to the proceedings against him". In the case before us, what is it that the appellant has been told? he has been told that the law requires him to tell the truth and if does not tell the truth, he may be prosecuted under Section 193, I.P.C. for giving false evidence". The plea of the appellant therein was that he was compelled to make the statement under the threat that otherwise his mother and another brother would be prosecuted. He had further stated that he was induced to make statement on the belief that it will be used only against the second accused and not against him. These pleas of the appellant therein had been disbelieved by both the trial Court and the High Court.
Excise Appeal Nos.70382 & 70397 of 2023 48 Therefore, it was held that even assuming that there was an inducement or threat, the appellant therein had no basis for supposing that by making the statement he would gain any advantage or avoid any evil with reference to the proceedings in respect of which an inquiry was being conducted by the Customs Officers. Therefore, even on this ground also Section 24 of the Evidence Act had no application. The above ratio squarely applies to the facts in this case. The appellant was under legal duty to state the facts truthfully lest he would be liable to prosecution. The threat emanates from and is that of the statute and the officers merely enforced the law. the allegations as to threat of implication of his wife was an afterthought and he did not mention the same when he appeared before the magistrate and obtained bail.
In Poolpandi etc. etc. V/s. Superintendent, Central Excise and Ors. etc. etc. (1992) 3 SCR 247] a three-Judge Bench was to consider whether the appellant therein was entitled to the presence of a counsel at the time of recording of his statement under Section 108 of the Act. In that context, this Court considered the ratio of Romesh Chandra Mehta's case and Illias case (supra) and held that "just, fair and reasonable test" could not be extended to a person whose statement was required to be recorded under Section 108 of the Act and the failure to give counsel's assistance is not violative of either Article 21 or Article 20 (2) or Article 20 (3) of the constitution. In that context, it was further held at page 247 that the purpose of inquiry under the Act and other similar statutes "will be completely frustrated if the whim of the persons in possession of useful information for the department are allowed to prevail. For achieving the object of such an enquiry if the appropriate authorities be of the view that such persons should be dissociated from the atmosphere and the company of persons who provide encouragement to them n adopting a non-cooperative Excise Appeal Nos.70382 & 70397 of 2023 49 attitude to the machineries of law, there cannot be any legitimate objection in depriving them of such company".
The contention of Shri Thakur that fairness of judicial process requires that such statements given by the accused should be strictly, meticulously and minutely scrutinised as they emanate at the threat of person in authority and are inadmissible in evidence under Section 24, does not merit acceptance for the reason that the primary object of enquiry under the Act is to initiate proceedings for confiscation of the contraband and collection of excise duty and the persons acquainted with the facts are duty bound to speak truth or to give statement truthfully upon the subject respecting with the person is examined or made statement at the pain of prosecution for perjury or produce such document or other things. In the light of the legislative policy the question of unfairness or untrustworthy of process does not arise and such a plea cannot be given countenance or acceptance.
Ramanlal Bhogilaal Shah & Anr. V/s. D.K. Guha & Ors. [(1973) 1 SCC 696] was cited in support of the contention that when the person summoned under Section 108 of the Act was in the company of the Customs Officer he was an accused and that, therefore, the appellant therein was entitled to the protection. That case is distinguishable from the present case. Therein, the appellant was arrested under the detention law. The Enforcement authorities had got information of the contraband. The search was followed by seizure of the documents. A case was registered on November 8, 1971 under Section 154 of the Code and on November 25, 1971 an order permitting further investigation was obtained from the Chief presidency magistrate. The FIR disclosed offence under Section 420, IPC and Section 423 of the FERA etc. When summons were issued on April 17, 1972, it was contended that he was an accused and that he could not be compelled to give Excise Appeal Nos.70382 & 70397 of 2023 50 evidence against himself violating Article 20 (3) of the constitution. On those facts, it was held that testimonial compulsion was prohibited under Article 20 (3).
It would thus be clear that the object of the Act empowering Customs Officers to record the evidence under Section 108 is to collect information of the contravention of the provisions of the Act or concealment of the contraband or avoidance of the duty of excise so as to enable them to collect the evidence of the proof of contravention of the provisions of the Act so as to take proceedings for further action of confiscation of the contraband or imposition of the penalty under the Act etc. By virtue of authority of law, the officer exercising the powers under the Act is an authority within the meaning of Section 24 of Evidence Act.
[1] Though the authority/officer on suspecting a person of having committed the crime under the Act can record his statement, such a person per force is not a person accused under the Act. [2] he becomes accused of the offence under the Act only when a complain is laid by the competent customs officer in the court of competent jurisdiction or magistrate to take cognizance of the offence and summons are issued. thereafter, he becomes a person accused of the offence. [3] A statement recorded or given by the person suspected of having committed an offence during the inquiry under Section 108 of the Act or during confiscation proceedings is not a person accused of the offence within the meaning of Section 24 of the Evidence Act. [4] Though the Customs Officer is an authority within the meaning of Section 24 of the Evidence Act, by reason of statutory compulsion of recording the statement or the accused giving voluntary statement pursuant to his appearing either after issuance of summons or after the appellant's surrender, such statement cannot be characterised to have been obtained by threat, inducement or promise. [5] The collection of evidence under Section 108 and other relevant Excise Appeal Nos.70382 & 70397 of 2023 51 provisions relating to search and seizure are only for the purpose of taking further steps for confiscation of contraband and imposition of penalty.6] The self-same evidence is admissible in evidence on the complaint laid by the Customs Officer for prosecution under Section 135 or other relevant statutes.
It is true, as pointed out by Shri Thakur, that PW-2 admitted in cross-examination that they treated the appellant as an accused and decided to prosecute the appellant. but the above evidence requires to be tested in the light of the above legal position. The assumption of PW- 2 that the appellant was an accused as on December 6, 1980, is erroneous, since as on that date on formal complaint had been laid against the appellant. Therefore, it cannot be considered that on December 6, 1980, the appellant was an accused of the offence under Section 24 of the Evidence Act.
Next question for consideration is: whether such statement can form the sole basis for conviction? It is seen that, admittedly, the appellant made his statement in his own hand-writing giving wealth of details running into five typed pages. Some of the details which found place in the statement were specially within his knowledge, viz., concealment of the 200 biscuits in his earlier rented house till he constructed the present house and shifted his residence and thereafter he brought to his house and concealed the same in his compound; and other details elaboration of which is not material. The question then is:
whether it was influenced by threat of implicating his wife in the crime which is the sole basis for the claim that it was obtained by threat by PW-2 and PW-5? In that behalf, the High Court has held that it could not be considered to be induced by threat that his wife will be implicated in the crime and accordingly disbelieved his plea. It is seen that Excise Appeal Nos.70382 & 70397 of 2023 52 admittedly after the appellant gave his statement, he was produced before the magistrate though no complaint was filed and was released on bail. He did not complain to the magistrate that Ex. P-4 statement was given under inducement, threat or duress. It was raised only subsequently making accusations against PW-5, the Inspector of Customs. Therefore, obviously it was only an afterthought. The High Court, therefore, rightly has not given any weight age to the same. It is true that the Magistrate has given various reasons for disbelieving the evidence of PW-3, the panch witness who had also, at one point of time, indulged in smuggling. It is unlikely that PW-3 would bring 200 gold biscuits of foreign marking and conceal them in the compound of the appellant without appellant's knowledge for safe custody. It is not his case that he had facilitated PW-3 in concealing them in his compound. The place of concealment of the contraband is also significant at this juncture. It is just near and visible from the window of his bed-room through which he or family members could always watch anyone frequenting the place where the contraband was concealed. This fact becomes more relevant when we consider that after concealment of the contraband in the compound one would ensure that others having access to the compound may not indulge in digging and carrying away the same. As soon as the appellant and/or the members of his family had sight of such visitor or movement by others, they would immediately catch hold of such person or would charge them. Obviously, therefore, it would be the appellant who had concealed 200 gold biscuits of foreign marking in his compound at a place always visible from his bedroom window. Therefore, the High Court was right in its conclusion, though for different reasons, that Ex.P-4 is a voluntary statement and was not influenced by threat duress or inducement etc. Therefore, it is a voluntary statement given by the appellant and is a true one.
Excise Appeal Nos.70382 & 70397 of 2023 53 The question then is: whether the retracted confessional statement requires corroboration from any other independent evidence? It is seen that the evidence in this case consists of the confessional statement, the recovery panchnama and the testimony of PWs 2, 3 and 5. It is true that in a trial and proprio vigore in a criminal trial, courts are required to marshal the evidence. It is the duty of the prosecution to prove the case beyond reasonable doubt. The evidence may consist of direct evidence, confession or circumstantial evidence. In a criminal trial punishable under the provisions of the IPC it is now well settled legal position that confession can form the sole basis for conviction. If it is retracted, it must first be tested whether confession is voluntary and truthful inculpating the accused in the commission of the crime. Confession is one of the species of admission dealt with under Sections 24 to 30 of the Evidence Act and Section 164 of the Code. It is an admission against the maker of it, unless its admissibility is excluded by some of those provisions. If a confession is proved by unimpeachable evidence and if it is of voluntary nature, it when retracted, is entitled to high degree of value as its maker is likely to face the consequences of confession by a statement affecting his life, liberty or property. Burden is on the accused to prove that the statement was obtained by threat, duress or promise like any other person as was held in Bhagwan Singh V/s. State of Punjab [AIR 1952 SC 214, para 30]. If it is established from the record or circumstances that the confession is shrouded with suspicious features, then it falls in the realm of doubt. The burden of proof on the accused is not as high as on the prosecution. If the accused is able to prove the facts creating reasonable doubt that the confession was not voluntary or it was obtained by threat, coercion or inducement etc., the burden would be on the prosecution to prove that the confession was made by the accused voluntarily. If the Court believes that the confession was Excise Appeal Nos.70382 & 70397 of 2023 54 voluntary and believes it to be true, then there is no legal bar on the Court for ordering conviction. However, rule of prudence and practice does require that the Court seeks corroboration of the retracted confession from other evidence. The confession must be one implicating the accused in the crime. It is not necessary that each fact or circumstance contained in the confession is separately or independently corroborated. It is enough if it receives general corroboration. The burden is not as high as in the case of an approver or an accomplice in which case corroboration is required on material particulars of the prosecution case. Each case would, therefore, require to be examined in the light of the facts and circumstances in which the confession came to be made and whether or not it was voluntary and true. These require to be tested in the light of given set of facts. The high degree of proof and probative value is insisted in capital offences.
In Kashmira Singh's case the co-accused, Gurcharan singh made a confession, The question arose whether the confession could be relied upon to prove the prosecution case against the appellant kashmira Singh. In that context, Bose, J. speaking for bench of three Judges laid down the law that the Court requires to marshall the evidence against the accused excluding the confession altogether from consideration. If the evidence do hors the confession proves the guilt of the appellant, the confession of the co-accused could be used to corroborate the prosecution case to lend assurance to the Court to convict the appellant. The Court considered the evidence led by the prosecution, de hors the confession of co-accused and held that the evidence was not sufficient to bring home the guilt of appellant Kashmira Singh of the charge of murder. The appellant was acquitted of an offence under Section 302 IPC but was convicted for the offence under Section 201 IPC for destroying the evidence of murder and sentenced him to seven years Excise Appeal Nos.70382 & 70397 of 2023 55 rigorous imprisonment. This decision was considered by a four-judge Bench in Balbir Singh V/s. State of Punjab [AIR 1957 SC 216] where in it was held that if there is independent evidence, besides the confession, the rule that the confession could be used only to corroborate the other evidences loses its efficacy. Therefore, it was held that if the retracted confession is believed to be voluntary and true, it may form the basis of a conviction but the rule of practice and prudence requires that it should be corroborated by independent evidence. Therein also, for the charges of capital offence, the trial court did not accept the confessional statement of co-accused containing inculpatory and self-exculpatory statement. The High Court reversed the acquittal and convicted the accused, accepting that part of the confessional statement of the accused which was corroborated from other evidence. This Court upheld the conviction and held that it is not necessary that each item of fact or circumstance mentioned in the confessional statement requires to be corroborated separately and independently. It would be sufficient if there is general corroboration. The ratio in Kashmira Singh's case was referred to.
In Hem Raj V/s. The State of Ajmer [1954 SCR 1133] a three-Judge Bench to which Bose, J. was a member, was to consider whether retracted confession of an accused could be corroborated from the material already in the possession of the police prior to the recording of the confession. Therein the confession was recorded under Section 164 of the Code during the committal proceedings but at the trial it was retracted. This Court held that the evidence already on record of the police could be used to corroborate the retracted confession.
In Haricharan Kurmi & Jogia Hajam V/s. State of Bihar [AIR 1964 SC 1184] a Constitution Bench was to consider as to when the confession of co-accused could be used as Excise Appeal Nos.70382 & 70397 of 2023 56 evidence under Section 3 of the Evidence Act. It was held that the confession of a co-accused cannot be treated as substantive evidence. If the Court believed other evidence and felt the necessity of seeking an assurance in support of its conclusion deducible from the said evidence, the confession of the co-accused could be used. It was, therefore, held that the Court would consider other evidence adduced by the prosecution. If the Court on confirmation thereof forms an opinion with regard to the quality and effect of the said evidence, then it is permissible to turn to the confession in order to receive assurance to the conclusion of the guilt of the accused. it is, thus, seen that the distinction has been made by this Court between the confession of an accused and uses of a confession of the co- accused at the trial. As regards the confession of the accused and corroboration to the retracted confession, in Girdhari Lal Gupta & Another vs. D.N. Mehta, Assistant Collector of Customs & another [1970 2 SCC 530] a Bench of two Judges considered and held that if the evidence of an investigating officer is found to be reliable, whether it can be used to corroborate the evidence depends on the facts of each case. I that case, relating to the offence under Foreign Exchange Regulation Act, it was held that the evidence of the investigating officer and other evidence could be used to corroborate the recoveries made of the Indian currency being exported. This Court upheld the conviction of the accused.
In Nishi Kant Jha vs. The State of Bihar [1969 (1) SCC 347], another Constitution Bench was to consider whether, when a part of the confessional statement is inculpatory and the other part exculpatory, the former point was admissible in evidence. It was held that the exculpatory part was inherently improbable and was contradicted by other evidence and was, therefore, unacceptable. The incriminating circumstances contained in the inculpatory Excise Appeal Nos.70382 & 70397 of 2023 57 part of the statement were accepted to confirm the conviction of the capital offence. The law laid down by a three-Judge Bench in Chandrakant Chimanlal Desai's case is not inconsistent with the above exposition of law.
It would thus be seen that there is no prohibition under the Evidence Act to rely upon the retracted confession to prove the prosecution case or to make the same basis for conviction of the accused. The practice and prudence require that the Court could examine the evidence adduced by the prosecution to find out whether there are any other facts and circumstances to corroborate the retracted confession. It is not necessary that there should be corroboration from independent evidence adduced by the prosecution to corroborate each detail contained in the confessional statement. The Court is required to examine whether the confessional statement is voluntary; in other words, whether it was not obtained by threat, duress or promise. If the Court is satisfied from the evidence that it was voluntary, then it is required to examine whether the statement is true. If the Court on examination of the evidence finds that the retracted confession is true, that part of the inculpatory portion could be relied upon to base conviction. However, the prudence and practice require that Court would seek assurance getting corroboration from other evidence adduced by the prosecution.
In Naresh J. Sukhawani V/s. Union of India [(1995) Supp. 4 SCC 663] a two-Judge Bench [to which one of us, K. Ramaswamy, J., was a member] had held in para 4 that the statement recorded under Section 108 of the Act forms a substantive evidence inculpating the petitioner therein with the contravention of the provisions of the Customs Act as he had attempted to export foreign exchange out of India. The statement made by another person inculpating the petitioner therein could be used against him as substantive evidence. Of course, the proceedings therein were for Excise Appeal Nos.70382 & 70397 of 2023 58 confiscation of the contraband. In Surjeet Singh Chhabra vs. Union of India [1997 (89) ELT 464], decided by a two Judge bench to which one of us, K. Ramaswamy J., was a member the petitioner made a confession under Section 108. The proceedings on the basis thereof were taken for confiscation of the goods. He filed a writ petition to summon the panch (mediater) witnesses for cross-examination contending that reliance on the statements of those witnesses without opportunity to cross-examine them, was violative of the principle of natural justice. The High Court had dismissed the writ petition. In that context, it was held that his retracted confession within six days from the date of the confession was not before a Police Officer. The Custom Officers are not police officers. Therefore, it was held that "the confession, though retracted, is an admission and binds the petitioner. So there is no need to call Panch witnesses for examination and cross-examination by the petitioner". As noted, the object of the Act is to prevent large-scale smuggling of precious metals and other dutiable goods and to facilitate detection and confiscation of smuggled goods into, or out of the country. The contraventions and offences under the Act are committed in an organised manner under absolute secrecy. They are white-collar crimes upsetting the economy of the country. Detection and confiscation of the smuggled goods are aimed to check the escapement and avoidance of customs duty and to prevent perpetration thereof. In an appropriate case when the authority thought it expedient to have the contraveners prosecuted under Section 135 etc., separate procedure of filing a complaint has been provided under the Act. By necessary implication, resort to the investigation under Chapter XII of the Code stands excluded unless during the course of the same transaction, the offences punishable under the IPC, like Section 120-B etc., are involved. Generally, the evidence in support of the violation of the provisions of the Act consists in the statement given or recorded under Section 108, the Excise Appeal Nos.70382 & 70397 of 2023 59 recovery panchnama (mediator's report) and the oral evidence of the witnesses in proof of the offences committed under the Act has consistently been adopting the consideration in the light of the object which the Act seeks to achieve."
4.5 Thus I proceed to examine the voluntary nature of the statements recorded from the Appellant 2, which have formed the sole basis for proceeding against the appellants. From the statements it is observed that these statements of Appellant 2 were recorded over period of three year, and all the statements are in respect of documents recovered during the search operation in the year 2015. Appellant 2 appears to be having some RAM fitted in his mind so as to recollect and reply to queries in flash of second/ minute like a supercomputer at the time of recording these statements three years later. Some excerpts from the statements recorded are reproduced below which show the true nature of the statement.
In each of the statement it has been recorded "the above statement given by me is correct and the questions being typed by the DGGI officers and their replies typed by me." The above fact which have been recorded in the statement presumes that the person whose statement has been recorded is an expert computer operator and could frame and type the replies to question posed by the DGGI officers while recording the statement. Further what is not very clear is whether the statement was recorded on a single computer connected with one key board or two key board, one being handled by the DGGI officer and other by the person whose statement is recorded. Further Appellant 2 whose statements form the basis of the entire case was not only typing the statement on the computer of DGGI was also examining the documents and charts prepared by the DGGI on the basis of the documents recovered during the search of premises and testifying their correctness. This exactly is the reason why I called Appellant 2 to be supercomputer if I have to hold that these statements are voluntary. However I do Excise Appeal Nos.70382 & 70397 of 2023 60 not find anything voluntary in these statement. Revenue has urged that the Appellant has deposited certain amount accepting his liability. However I find that courts have held that mere deposit of certain amounts during investigations do not amount to acceptance of liability. Madras High Court as reported at Shri Nandhi Dhall Mills India Private Limited [2021 - VIL - 271 - Mad] held as follows:
"Merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability and has also made a few payments as per the statement, cannot lead to self-assessment or self-ascertainment. The ascertainment contemplated under Section 74(5) is of the nature of self-assessment and amounts to a determination which is unconditional, and not one that is retracted as in the present case."
4.6 In case of Kuber Tobacco Products Limited [2024 SCC Online Del 10416] Hon'ble Delhi High Court held as follows:
"32. In the present case, there is no evidence to show that the basic raw material required for the manufacture of huge quantity of Gutkha and Khaini was procured by the respondents. Tribunal also found no tangible evidence of removal from the factory of unaccounted goods allegedly manufactured by loading from factory and transportation there from. Tribunal found no reliable evidence of the actual customer/recipient of the clandestinely removed goods with their confirmation of unauthorized payment towards unaccounted purchase of goods allegedly manufactured and removed in a clandestinely manner from the factory of the respondents. Tribunal also found no recovery of any unaccounted sale proceeds or substantial cash in the factory or office premises or anywhere else in control of the respondent company, backed by any confirmation, oral or written, from the person giving such cash against the goods Excise Appeal Nos.70382 & 70397 of 2023 61 removed in clandestine manner without payment of duty from the factory of the respondents.
33. The Commissioner in his impugned order answered the charge of clandestine removal of goods against the respondents on the basis of capacity of machines installed in the factory of the respondents, the electricity generated by gen-sets, number of labourers employed by them in the factory and the raw materials consumed during the relevant period. All these findings were arrived at essentially on the basis of statement of the witnesses read with contents of Hisaba Books, Kachcha Challans, loose sheets and G.Rs of the transporters stated to have been recovered during the course of investigation. While basing his findings, Commissioner took note that the total number of machines was 137 and as per the letter of the Chairman of the Board, each machine could manufacture 200 pouches per minute and therefore 137 machines could manufacture 277425000 pouches per month and if all the machines are utilized in three shifts for 25 days in a month, the total production would be 832275000 pouches per month. On the basis of the same, Commissioner made an estimate that for the period of 14 months from 07.05.1997 to 30.06.1998, the total production of KTPPL ought to have been 1165 crores of pouches i.e. 882575 bags and for the period of three months from 01.07.1998 to 05.08.1998 considering the capacity production, it would be 525523 crore pouches i.e. 193356 bags, while the accusation has been restricted to 69551 bags. As regards the electricity consumed, the view of the Commissioner was that the loose sheets disclose that during the period of 20 days i.e. from 11.06.1998 to 30.06.1998, the appellants had purchased 29600 litres of diesel. The DG set consumes 55 liters per hour and therefore there was sufficient diesel to manufacture the high quantity of the goods by the respondents. Since at least two labourers were required to operate each machine, besides Excise Appeal Nos.70382 & 70397 of 2023 62 other labourers would also be required for packing, crushing of Supari, Kattha, mixing of compound and other ingredients, the respondents ought to have employed sufficient number of employees. The balance sheets of the respondents during the relevant years disclose employment of 50 to 60 labourers but the Commissioner disbelieved the same to be true on the ground that the number of employees must have been shown less to avoid provident fund liability and other complications and therefore the record in that regard must have been manipulated. Though, the suppliers disputed the supply of raw material to the respondents, the Commissioner was of the view that the same stands established by the contents of the loose sheets. Even though, the alleged supplier M/s. Isha Plastics denied supply of goods as described in the loose sheets but in the absence of details of supply being submitted by them, the Commissioner was of the view that they must have supplied the required number of bags. Similarly, the other supplier M/s. Alliance Overseas also denied the supply of liquid Paraffin and Glycerin but Commissioner took the view that the six invoices clearly disclosed the sale of liquid Paraffin which was arranged by him through a dealer to the respondents. He was also of the view that as regards tobacco, the loose sheets refer to 37330 kgs tobacco which was sufficient to manufacture lakhs of pouches of Gutkha.
34. Learned CESTAT (majority view) took the view that working of the machines in the respondents' factory was not tested or certified to ascertain the production capacity of the machines. There is no Panchnama drawn to ascertain as to how many machines in the factory of the respondents were in working condition or were actually working and what was the production capacity of each of those machines. No records were available to hold that respondents were working in three shifts. It was for the department to ascertain and establish the same. The burden in this regard Excise Appeal Nos.70382 & 70397 of 2023 63 was on the department to prove the allegations with cogent material but the finding in this regard has been arrived at by the Commissioner essentially on assumptions and without any basis. There is no evidence of respondent employees having been employed to enhance the production nor is there any evidence of excess wages having been paid to the listing employees. The CESTAT (majority view) rightly observed that the letter of the Chairman about the normal rule of production cannot be a proof of the actual production capacity of the machines in the respondent's factory.
35. CESTAT ruled that Hisaba Book makes reference to various firms and persons as the buyers of the quantity mentioned therein. However, no attempt was made to record the statement of any such person at all. Member (Judicial) recorded in Para 33 of his order that for confirming charges and for accepting the evidence adduced, a series of assumptions and presumptions are to be made, viz:
(j) The total number of machines installed was intimated on 11.8.97, which was not found incorrect by visiting Central Excise Officers or in Audit inspection by CERA and internal audit and there is no evidence of working for more than one shift a day. As per the appellant, the production capacity with such machines, in one shift, is not sufficient to manufacture the alleged huge quantity alleged to be removed in clandestine manner, and moreover, the duty fixed by the Board per machine, if taken into account would also indicate much less production than alleged in the Notice. As rightly observed by the Hon'ble President, the working of the machines in the appellant's factory was not tested or certified to ascertain the production Excise Appeal Nos.70382 & 70397 of 2023 64 capacity of the machines installed. Even number of machines installed in working condition was not recorded in panchnama drawn at factory.
There is no record to show that the appellants were working for three shifts. Panchnama regarding the production capacity of the machines at totally different factory of a stranger could not have been applied to decide production capacity of the machines in the appellant's factory, as has been sought to be done in the impugned Orders. There is no evidence of additional employees having been employed to enhance the production, nor is there any evidence of excess wages having been paid to the existing employees. However, it is to be assumed that the factory was continuously running for three shifts, more machines than declared were installed, and that the actual production was grossly suppressed.
1. (ii) Although, the stock of raw material found on physical verification at factory at 31-K, Siraspur, under panchnama dated 9.10.1998 'was found as per record, and there is no evidence of purchase of main raw materials 'Betel Nuts' (which constitutes 85% of the raw materials), Catechu, Perfume and Lime, it is to be assumed that all these raw materials were purchased in cash, brought to factory, and used in unaccounted manufacture of Pan Masala / Guthka in the factor premises.
2. (iii) Despite the fact that the panchnama do not describe or identifies in its annexure which enlists the documents stated to have been recovered from the premises, recovery of any 'hisaba book' or 'Kachha Challans' or 'loose sheets with written pages', it is to be assumed that the same were recovered under the Excise Appeal Nos.70382 & 70397 of 2023 65 panchnama drawn at Premises 4130, Gali Barna, Delhi.
(v) It is to be assumed that Shri Bothra would have keys to the said premises, although not recorded in the Panchnama.
(vi) Although the alleged supplier of paraffin, Shri Rajiv Gulati stated that he issued invoices only if he sells the goods and denied the contents of loose sheets, it is to be assumed that he had supplied paraffin,
(vii) Although Shri Bhikam Chand Chaudhary in his statement, when confronted with loose sheets for alleging supply of Tobacco to the assessee by Mis Shambhu Dayal Kaushal &Sons and Mis Shiv Devi Enterprises showed his unawareness about the same, it is to be assumed that unaccounted Tobacco as mentioned in the loose sheets was supplied by them to the appellant company.
(viii) Although Shri Chetan Kanodia of M/s Kanodia Technoplast Pvt Ltd, in his statement denied the contents of loose sheets and denied having sold laminations without invoices or having received payments in cash against any such sale, it is to be assumed that the alleged unaccounted laminations were sold by him to the appellant company.
(ix) There is no evidence of any fruitful inquiry from any Courier services, despite allegation of dispatch of Kachha Challans by the appellant company through any Courier Service, however it is to be presumed that the same were sent through Courier by the appellant company.
(x) It is to be assumed that huge quantity of 91445 bags was removed from factory in a clandestine manner.
(xi) Although the amount of Rs. Two Crores deposited during the investigations was clearly deposited by recording on the Challans 'Duty under protest', it is Excise Appeal Nos.70382 & 70397 of 2023 66 to be assumed that the said payment was voluntary with acceptance of the clandestine removal.
(xii) It is to be assumed that Original Kachha Challans must have been destroyed by all of the alleged distributors/dealers.
(xiii) It is to be assumed that 'packet' mentioned on Kachha Challans, is actually 'bag',
(xiv) It is also to be assumed that the appellant manufacturer was the actual consignor although the name of the consignor in the GRs /RRs relied by Revenue are other than that of the appellant manufacturer;
(xv) It is also to be assumed that although the description of goods on GR /RR were 'Chewing Tobacco', 'Tobacco', 'Supari', 'Garments, Shoes, Handloom Cloth etc', 'Gum Powder', 'Rakhi', the same actually were 'Branded Guthka' manufactured and clandestinely cleared by the appellant company.
(xvi) It is to be assumed that there must be receipt of cash amount over and above the sale amount recorded in statutory records to sustain the charge of under-valuation.
(xvii) Despite retractions having been filed, and the veracity of alleged voluntary statements was effectively assailed in cross- examination, it is to be assumed that all the statements relied by the Revenue were voluntary."
36. The burden of proving the clandestine removal was on the Revenue. The credibility of the documentary evidence i.e. seizure memos, the loose sheets, Hisaba Books for proving the involvement of respondents in the clandestine activities was required to be duly established. The authors of the loose sheets and the Hisaba Books were not Excise Appeal Nos.70382 & 70397 of 2023 67 examined. The main evidence relied upon by the Revenue consisting of Hisaba Book, Kachcha Challans and loose sheets are duplicate copies, raising questions about their authenticity. There is no proof that the contents of the documents are accurate. Further, the proper procedures for the seizure of the documents to ensure the authenticity and integrity of the seized material has also not been followed by the Revenue and this includes the proper sealing and protection from tampering.
37. The allegations of clandestine removal and under valuation as brought-forth by the Revenue were required to be substantiated with tangible evidence rather than being sought to be supported merely on the basis of assumptions and presumptions. Revenue has not presented any direct evidence that unequivocally establishes the respondent's involvement in clandestine removal and under valuation of the goods. The charges are heavily reliant on a series of assumptions, such as factories operating in three shifts and unrecorded production and sales without complete evidence to back such claims. There is also no verified assessment of the production capacity of the installed machines in a single shift operation nor any evidence to suggest that the factory was operating beyond the stated capacity. Assertions by the Revenue about the production capacities are speculative without testing or certification by the competent authority.
38. The physical verification of the stocks and the absence of discrepancies in the recorded quantity of the raw material as well as the lack of evidence regarding the purchase of significant quantities of raw materials and cash undermine the presumption of unaccounted manufacture. Furthermore, the recovery of documents from the premises unrelated to the respondents and reliance of such documents to establish clandestine operations are found to be procedurally flawed and legally untenable by the learned CESTAT. The reliance by the Revenue on the statements that have been retracted Excise Appeal Nos.70382 & 70397 of 2023 68 or challenged in cross-examination, without corroborating evidence weakens the credibility of such testimonies as the basis for establishing the guilt. Based upon above, learned Tribunal (Majority view) has rightly concluded that the evidence sought to be relied upon in support of allegations against the respondents are unreliable, uncorroborated and unsustainable to establish the charge of clandestine removal of goods.
39. The charges of clandestine removal and under valuation against the respondents in this case cannot be sustained merely on the basis of assumptions and presumptions. The absence of direct, credible evidence linking the respondents to the alleged offences necessitate the dismissal of the charges. The decision is grounded on the principles of justice and the requirement for the burden of proof to be satisfactorily met by the party alleging the wrong doing. There is no dispute with regard to the principle of law laid down in the authority cited by the learned Standing Counsel on behalf of the appellant. However, they are distinguishable and applicable in the facts and circumstances of the said cases.
40. On a careful perusal of the reasons assigned and the case law relied upon in the impugned order, it is evident that learned President (Judicial) and Member (Judicial) conducted a meticulous exercise to examine and appreciate the evidence on record in the light of the settled principles and came to a categorical finding that in the absence of cogent evidence on record, charges of clandestine removal against the respondents cannot be said to have been proved.
41. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of the respondents, in the facts and circumstances of this case, we Excise Appeal Nos.70382 & 70397 of 2023 69 hold that the impugned majority order of the CESTAT does not suffer from serious error and does not merit any interference. The appeal is therefore dismissed."
4.7 In case of Raghunath International Ltd. [Order dated 11.09.2022 in Central Excise Appeal No 14-22/2022] Hon'ble Allahabad High Court has held as follows:
3. The revenue seeks to challenge the order passed by the CESTAT, Allahabad setting aside the demand of duty, interest and penalty as adjudged under the original order dated 7.9.2020 of the Adjudicating Authority on the questions of law framed in the memo of appeal as under:-
a. Whether the retracted confessional statement requires corroboration from any other independent evidence? b. Whether demand of duty based on the third party documents supported by corroborative statements was not justified?
c. Was the CESTAT justified in ignoring the entire evidence on record and statements of the witnesses and concerned persons?
d. Was the CESTAT justified in setting aside or reducing, as the case may be, the demand, redemption fine and confiscation of goods by ignoring material facts? e. Whether statements recorded under provisions of Section 14 of CE Act by the officers of the Department can be taken as proof of the statutory violations by the respondents?"
16. Having noted the above submissions and the findings returned by the Adjudicating Authority as also the CESTAT on the facts brought before them, we are required to answer as to whether any substantial question of law arises for consideration in this appeal so as to admit it for examination within the scope of sub-section (3) and (4) of Section 35-G. Excise Appeal Nos.70382 & 70397 of 2023 70
17. It may be noted, at the outset, that there is no dispute with regard to the factual findings recorded by the CESTAT that all persons including the Authorized Signatory of the manufacturers in their cross-examination before the Adjudicating Authority had retracted from their statements recorded under Section 14, during investigation, with the categorical statements that their previous statements were recorded by the officers of the Central Excise Department under duress. The categorical statement by Sri Rajesh Agarwal, Authorized Signatory of three manufacturers, in his cross-examination dated 7.2.2017, explained the condition in which his statement under Section 14 was recorded, when he stated that he was surrounded by the officers in DGCEI Office, Delhi in the late hours of night and then the statement was recorded as dictated by the officers.
The findings returned by the Adjudicating Authority that Sri Rajesh Agarwal in his various voluntary statements and acceptance had confirmed his active involvement in the tax evasion by management of raw materials and managing removal of clandestinely manufactured ''Sir' Brand Gutkha/Pan Masala to various destinations, thus, suffers from apparent perversity.
18. On the basis of the said findings and in view of the statement of Sri Rajesh Agarwal, the Authorized Signatory of three manufactures in his cross-examination, it cannot be accepted that his statement recorded by the Central Excise Officers was voluntary. The question is not of admissibility of the statement recorded under Section 14. The admissibility of the evidence recorded by the investigating authority, when the persons making statements were examined as a witness before the Adjudicating Authority is not under question. The issue is about the weight of the evidence appreciated by the Adjudicating Authority.
19. Clandestine removal is a serious charge as held by the Division Bench in Continental Cement Company (supra).
Excise Appeal Nos.70382 & 70397 of 2023 71 Clinching evidence are required to be produced by the Revenue to discharge its obligation of establishment of the said charge against the manufacturer. In the instant case, it could not be brought by the counsel for the Revenue that apart from the evidence of the persons examined during the course of investigation, there was other material in the nature of incriminating documents confiscated from the premises of three manufacturers which would establish the allegation of clandestine removal against the manufacturer. No other incriminating material such as discrepancy in the accounting of raw material/finished goods could be placed before us so as to substantiate his stand by the counsel for the Revenue that the retracted statements of Authorized Signatory of the appellant/manufacturer was an afterthought and there was sufficient material before the Adjudicating Officer to record the finding of clandestine removal based on cogent evidence.
20. No presumption or assumption can be drawn to record any perversity in the findings of the CESTAT, the Appellate Tribunal, which has recorded that the appellants manufacturers are neither consignor or consignee for the alleged transportation of goods in the third party transporters records. It was categorical stand of the manufacturers before the CESTAT that they have been selling their goods throughout the ex-factory at ex-factory price and it is the buyer, who after taking delivery, arranges for the transportation themselves.
21. The findings returned by the Tribunal that all the persons, whose statements were relied upon, either retracted their earlier statements, which were recorded during investigation and/or the veracity of their statements did not stand the test of cross-examination during the adjudication proceeding, cannot be said to suffer from any error of law, in view of the categorical stand of these persons that their previous statements were recorded under Excise Appeal Nos.70382 & 70397 of 2023 72 threat, coercion and were the result of duress. Moreover, this is an appeal in the nature of second appeal which can be admitted only if the Court is satisfied that any substantial question of law is involved in the appeal.
22. For the above discussion, no question of law much less substantial question of law arises for consideration by us, in the facts and circumstances of the case, inasmuch as, no perversity can be seen in the decision of the CESTAT in setting aside the findings of the Adjudicating Authority based solely on the retracted confessional statements recorded during investigation under Section 14 of the Act by the officers of the Central Excise Department. None of the questions framed in the memo of appeal or raised during the course of arguments arise for consideration. The appeals, thus, cannot be entertained.
4.8 In view of the discussions as above I do not find any merits in impugned order to the extent of making demand in respect of clandestine removal of finished goods and packing material as the fact of clandestine removal cannot be substantiated.
4.9 On the issue of denial of CENVAT Credit in respect of the GTA services received by the appellant 1, in respect of outward transportation of the finished goods I find that the issue is squarely covered by the Circular No 1065/4/2018 dated08.06.2018 issued by the CBIC, wherein following has been clarified:
"3. General Principle:
As regards determination of „place of removal‟, in general the principle laid by Hon‟ble Supreme Court in the case of CCE vs Ispat Industries Ltd 2015(324) ELT670 (SC) may be applied. Apex Court, in this case has upheld the principle laid down in M/s Escorts JCB (Supra)to the extent that „place of removal‟ is required to be Excise Appeal Nos.70382 & 70397 of 2023 73 determined with reference to „point of sale‟ with the condition that place of removal (premises) is to be referred with reference to the premises of the manufacturer. The observation of Honb‟leCourtin para 16 in this regard is significant as reproduced below "16. It will thus be seen where the price at which goods are ordinarily sold by the assessee is different for different places of removal, then each such priceshall be deemed to be normal value thereof. Sub-
clause (b) (iii) is very important and makes it clear that a depot, the premises of a consignment agent, or any other place or premises from where the excisable goods are to be sold after their clearance from the factory are all places of removal. What is important to note is that each of the premises is referable only the manufacturer and not to the buyer of excisable goods. The depot or the premises of the consignment agent of the manufacturer are obviouslyplaces which are referable to the manufacturer. Even the expression "any other place of premises" refers only to a manufacturer‟s place or premises because such place or premises is to be stated to be where excisable goods "are to be sold". These are key words of the sub-section. The place or premises from where excisable goods are to be sold can only be manufacturer‟s premises or premises referable to the manufacturer. If we were to accept contention of the revenue, then these words will have to be substituted by the words "have been sold" which would then possibly have reference to buyer‟s premises. "
4.Exceptions:
(i) The principle referred to in para 3 above would apply to all situations except where the contract for sale Excise Appeal Nos.70382 & 70397 of 2023 74 is FOR contract in the circumstances identical to the judgment in the case of CCE, Mumbai-III vs Emco Ltd 2015(322) ELT 394(SC) and CCE vs M/s Roofit Industries Ltd 2015(319) ELT 221(SC). To summarise, in the case of FOR destination sale such as M/s Emco Ltd and M/s Roofit Industries where the ownership, risk in transit, remained with the seller till goods are accepted by buyer on delivery and till such time of delivery, seller alone remained the owner of goods retaining right of disposal, benefit has been extended by the Apex Court on the basis of facts of the cases."
From the above circular it is clear that in case of the for destination sales effected by the manufacturer the CENVAT Credit of GTA on outward transportation is admissible to the point of the delivery of the goods. However for determining taking note of the decision of the Hon'ble Apex Court on the issue Board had directed that this fact whether the sales were effected on FOR basis needs to be verified in each case. Impugned order do not record any finding in respect of the nature of the sale made, as to whether they were made on FOR basis or at factory gate. I also find that Board has specifically clarified against invocation of extended period of limitation in all such cases.
4.10 In view of the above clarification issued by the Board the matter needs to be remanded back to the original authority for determination of nature of sale for the normal period of limitation and thereafter rendering a finding in respect of the admissibility of CENVAT credit only that is within normal period of limitation from the date of Show cause notice.
4.11 With regards to the demand made by referring to Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, I find that the demand has been made in respect of the clearances reflected in the ER-1 returns of the Appellant 1. Annexure 5 (a) to 5 (g) have been made Excise Appeal Nos.70382 & 70397 of 2023 75 determining the short payment by application of the said rule in respect of the clearances which were reflected in the ER-1 filed by the appellant. In view of the fact that all these clearances were duly reflected in the ER-1 returns filed by the Appellant 1, I do not find any merits in the invocation of extended period of limitation for making this demand. Thus I set aside the demand made in this head by invoking extended period of limitation. The matter is remanded back to the original authority for redetermination of the demand if any within normal period of limitation.
4.12 I also find that demand of Rs 2432.69 has been made by alleging suppression of invoice value in ER-1 for the month of June 2013, is barred by limitation and needs to be set aside.
4.13 Summarizing the findings in respect of demands made from Appellant 1:
a. Demand of Rs 23,03,781/- made in respect of alleged clandestine clearance of Kraft Paper is set aside. (Para 4.8) b. Demand of Rs 74,827/-made is respect of alleged clandestine clearance of packing material is set aside. (Para 4.8) c. Demand Rs 10,71,211/- made in alleging undervaluation oin terms of Rule 7 of the Central Excise Valuation Rules, 2000, by invoking extended period of limitation is set aside and the matter remanded to the original authority for determination of the amount demandable within normal period of limitation. (Para 4.11) d. Demand of Rs 3,19,176/- made by denying the CENVAT Credit availed in respect of GTA services for the outward transportation of the finished goods is set aside and the matter remanded to original authority for redetermination of the issue in accordance with Circular No 1065/4/2018 dated 10.06.2018 for the normal period of limitation. (Para 4.10) Excise Appeal Nos.70382 & 70397 of 2023 76 e. Demand of Rs 2432.69/- made for the period June 2013 is set aside (Para 4.12) 4.14 As I do not find much merits in the demand made in the impugned order and invoking of extended period of limitation I am not inclined to uphold the penalties imposed on appellant 1 and appellant 2 and set aside the same.
5.1 Appeal of appellant 1 is partly allowed as indicated in para 4.13. On the issues were matter is remanded to the original authority, adjudicating authority should decide the matter within three months of receipt of this order.
5.2 Appeal of appellant 2 is allowed.
(Order pronounced in open court on-25 June, 2025) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp