Custom, Excise & Service Tax Tribunal
Kaya Fragrance Pvt. Ltd. vs C.C.E. Kanpur on 15 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.167 of 2012
(Arising out of Order-in-Original No. 19 & 20/ Commissioner/2011 dated
18.08.2011 passed by Commissioner, Central Excise and Service Tax Kanpur)
M/s Kaya Fragrance Pvt. Ltd., .....Appellant
(53/10, Nayaganj, Kanpur-208001)
VERSUS
Commissioner of Central Excise &
Service Tax, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur-208005)
WITH
Excise Appeal No.168 of 2012
(Arising out of Order-in-Original No. 19 & 20/ Commissioner/2011 dated
18.08.2011 passed by Commissioner, Central Excise and Service Tax Kanpur)
M/s Hi-Choice Collections Pvt. Ltd., .....Appellant
(53/10, Nayaganj, Kanpur-208001)
VERSUS
Commissioner of Central Excise &
Service Tax, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur-208005)
AND
Excise Appeal No.169 of 2012
(Arising out of Order-in-Original No. 19 & 20/ Commissioner/2011 dated
18.08.2011 passed by Commissioner, Central Excise and Service Tax Kanpur)
Shri Manish Kanodia, Director .....Appellant
(M/s Kaya Fragrance Pvt. Ltd.,
53/10, Nayaganj, Kanpur-208001)
VERSUS
Commissioner of Central Excise &
Service Tax, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur-208005)
APPEARANCE:
Shri Atul Gupta, Advocate for the Appellants
Shri A.K. Choudhary, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
2 Excise Appeal Nos.167-169 of 2012
FINAL ORDER NOs.70421-70423/2024
DATE OF HEARING : 13 March, 2024
DATE OF PRONOUNCEMENT : 15 July, 2024
SANJIV SRIVASTAVA:
These appeals are directed against Order in Original No. 19
& 20/ Commissioner/2011 dated 18.08.2011 of the
Commissioner Central Excise and Service Tax Kanpur. By the
impugned order following has been held:
ORDER
1. I confirm the demand of Central Excise duty of Rs.80,47,336/- [ Rs. Eighty Lakh Forty Seven Thousand Three Hundred and Thirty Six Only] (CENVAT Duty of Rs.59,18,900/-, NCCD of Rs.11,83,780/-, AD of Rs.7,10,268/-, ED Cess of Rs.1,56,259/- and SHE Cess of Rs.72,129/- only) upon M/s Kaya Fragrance Pvt. Ltd. 53/10, Nayaganj, Kanpur under the Section 11A(1) of the Central Excise Act, 1944.
2. I confirm the demand of Central Excise duty of Rs. 81,16,710/- [ Rs. Eighty One Lakh Sixteen Thousand Seven Hundred and Ten Only] (Rs.59,69,925/-, NCCD of Rs.11,93,985/-, AD of Rs.7,16,391/-, ED Cess of Rs.1,57,606/- and SHE Cess of Rs.78,803/-only) upon M/s Hi-Choice Collections Pvt. Ltd., 53/10, Nayaganj, Kanpur under the Section 11A(1) of the Central Excise Act, 1944.
3. I confirm the demand of Interest under Section 11AB of the Central Excise Act, 1944, from M/s Kaya Fragrance Pvt. Ltd. and M/s Hi-Choice Collections Pvt. Ltd., 53/10, Nayaganj, Kanpur on delayed payment of duty
4. I impose penalty of Rs.80,47,336/-[Rs. Eighty Lakh Forty Thousand duty. Three Hundred and Thirty Six Only] upon 3 Excise Appeal Nos.167-169 of 2012 M/s Kaya Fragrance Pyt. Ltd. under Rule 25 read with Section 11AC of the Central Excise Act, 1944.
5. I impose penalty of Rs.81,16,710/- [Rs. Eighty One Lakh Sixteen Thousand Seven Hundred and Ten Only] upon M/s Hi-Choice Collections Pvt. Ltd.,53/10, Nayaganj, Kanpur under Rule 25 read with Section 11AC of the Central Excise Act, 1944.
6. I impose penalty of Rs. 10,00,000/- [ Rs. Ten Lakhs Only] upon Shri Manish Kanodia, Director of M/s Kaya Fragrance Pvt. Ltd. & M/s Hi- Choice Collections Pvt. Ltd., 53/10, Nayaganj, Kanpur under Rule 26 of the Central Excise Rules, 2002 for his involvement and supervision of clandestine removal of Tiranga brand Gutkha.
7. I impose penalty of Rs. 10,00,000/- [ Rs Ten Lakhs Only] upon M/s Bihar Carrying Company, T.P. Nagar Kanpur under Rule 26 of the Central Excise Rules, 2002 for their active involvement in the clandestine removal of Tiranga brand Gutkha.
2.1 M/s Kaya Fragrance Pvt. Ltd., (Appellant 1) is engaged in the manufacture of, 'Tiranga' brand of Gutkha, falling under tariff item 24039990 of first schedule to the Central Excise Tariff Act, 1985. .They were having Central Excise Registration No. AACCK4402FXM001, which was surrendered by them on 16.07.07. Thereafter, M/s Hi-Choice Collection Pvt. Ltd. (Appellant 2) obtained the Central Excise registration No. AABCH5385BXM001 and started manufacturing of, interalia, 'Tiranga' brand Gutkha from 03.08.07, in the same premises. Shri Manish Kanodia (Appellant 3) was the Director of Appellant 1 and continued in same capacity with Appellant 2.
2.2 A team of the officers of Directorate General of Central Excise Intelligence, New Delhi, searched the business premises of M/s Bihar Carrying Co., T.P. Nagar, Kanpur on 09.05.2008 and resumed, interalia, some incriminating documents in the form of a 'Private Diary Pad', which is mentioned at S.No.32 of the panchnama dated 09.05.2008 drawn on the spot. The 4 Excise Appeal Nos.167-169 of 2012 'Private Diary Pad' contained the details of various brands of Gutkha, which were received in the transport company for transportation to various stations/ destinations. The statement of Shri Uma Shanker Awasthi, Manager of transport company was recorded on 10.05.2008 for deciphering of the contents of resumed records. During the course of statement, the Loading Registers were also tendered by Shri Uma Shanker Awasthi.
2.3 Thereafter investigations were made at the end of supplier of raw material and at the premises of the Appellant's. Statements of other person concerned with the matter were recorded. From the details of evidences and the investigations, revenue was of the view that by their acts of omission & commission, appellants contravened the various provisions of the Central Excise Act, 1944 and the Central Excise Rules, 2002 in as much as they failed to:
properly maintain the Daily Stock Account, in as much as they did not enter the production and removal of finished goods, which were clandestinely cleared to various customers. Thus, contravening the provisions of Rule 10 of the Central Excise Rules, 2002;
correctly assess the duty payable on the dutiable goods sold to various customers, contravening the provisions of Rule 6 of the Rules, ibid;
issue proper invoice for the clearance of the finished goods, in contravention of the provisions of Rule 11 of the Rules, ibid;
pay duty involved on goods cleared clandestinely thereby contravened the provisions of Rule 4 & 8of the Rules, ibid;
properly and correctly file the monthly return showing actual production and clearance etc. of the excisable goods, in contravention of Rule 12 of Rules, ibid;
2.4 Thus, they were involved in the evasion of duty, by way of suppression of production and clandestine removal thereof, 5 Excise Appeal Nos.167-169 of 2012 without its accountal and without cover of proper invoice and without payment of duty Appellants had wilfully suppressed the fact of actual production and clandestine clearance thereof to their different buyers without issuance of invoices, with intent to evade payment of duty. Thus, The proviso to Section 11A(1) of Central Excise Act, 1944, for invoking the extended period, The interest on delayed payment of duty was also recoverable from the under Section 11AB of the Act;
2.5 Appellant 1 & 2 were liable for penal action under Rule 25 of Central Excise Rules, 2002, read with Section 11AC of the Central Excise Act, 1944 for the violations of various provisions of law. Appellant 3 rendered himself liable for penal action under Rule 26 of the Rules,ibid for his active involvement in evasion of duty.
2.6 A show cause notice dated 29.04.2010 was issued to Appellant 1 asking him to show cause as to why:-
o Central Excise duty of F.s.59,18,900/-, NCCD of Rs.11,83,780/-, AD of Rs.7,10,268/-, ED Cess of Rs.1,56,259/- and SHE Cess of Rs.72,129/- (Total Rs.80,47,336/-) only should not be recovered under the Section 11A(1) of the Central Excise Act, 1944, invoking the extended period;
o Interest, under Section 11AB of the Central Excise Act, 1944, should not be recovered from them on delayed payment of duty, involved on clandestinely removed goods;
o Penalty should not be imposed on them under the provisions of Rule 25 of Central Excise Rules, 2002, read with Section 11AC of Central. Excise Act, 1944.
Appellant 2 asking them to show cause as to why:-
o Central Excise duty amounting to Rs.59,69,925/-, NCCD of Rs. 11,93,985/- AD of Rs.7,16,391/-, ED Cess of Rs.1,57,606/- and SHE Cess of Rs.78,803/-6 Excise Appeal Nos.167-169 of 2012
(Total Rs.81,16,710/- only) should not be recovered under the Section 11A(1) of the Central Excise Act, 1944, invoking the extended period;
o Interest under Section 11AB of the Central Excise Act, 1944, should not be recovered from them on delayed payment of duty, involved on clandestinely removed goods;
o Penalty should not be imposed on them under the provisions of Rule 25 of Central Excise Rules, 2002, read with Section 11AC of Central Excise Act, 1944.
Appellant 3 was asked to show cause as to why penal action should not be taken against him under Rule 26 of Central Excise Rules, 2002, for his active involvement of evasion of duty by the Appellant 1 and 2 Transporter was also asked to show cause as to why penal action should not be taken against him under Rule 26 of Central Excise Rules, 2002, for his active involvement in transportation of non-duty paid excisable goods.
2.7 The show cause notice has been adjudicated as per the impugned order referred in para 1, above. Aggrieved Appellants have filed these appeals. No appeal filed by transport company namely M/s Bihar Carrying Corporation is available on record or brought to the notice of the bench.
3.1 We have heard Shri Atul Gupta, Advocate for the appellants and Shri A K Choudhary, Authorized Representative for the revenue.
4.1 We have considered the impugned order along with the submissions made in appeals and during the course of arguments.
4.2 Impugned order records findings as follows:
"After careful scrutiny of the records related to the case, I consider that prior to discussing the matter on merits, it would be better to refresh the case in brief. The facts of the case are that the party is engaged in the manufacture 7 Excise Appeal Nos.167-169 of 2012 and clearance of dutiable articles i.e. Pan Masala and Gutkha of „Tiranga' brand. A search was conducted by the officers of DGCEI, New Delhi in the business premises of M/s Bihar Carrying Company Pvt. Ltd. During the search operation certain documents viz. Private Diary Pad and JST Slips were found wherein details of certain quantity of goods was shown as receipt and dispatched respectively at the transporter's premises. On the reasonable belief that these were the entries of receipt of Gutkha (in Private Diary Pad) and dispatches (in JST Slips), the officers recorded the statement of Shri Uma Shanker Awasthi Manager of the transport company. He tendered 5 Registers to the officers stated to be the Loading: Registers, another private record containing details of loading and dispatches. Shri Uma Shanker Awasthi in his statement dated 10.05.08 admitted that the details given in Private Diary Pad, JST Slips and Loading Registers were of various brands of Gutkha of different manufacturers. Entries were made in coded form in respect of different brands as well as of destinations. He deciphered the entries and corroborated then with each other on sample basis establishing thereby the authenticity of records. On the basis of codes decoded by Shri Uma Shanker Awasthi, Manager, Chart No. 4, was prepared showing clearance of Tiranga brand Gutkha as per entries made in those records. As per Chart No.4, which was prepared on the basis of Private Diary Pad, a total 2330 bags of 'Tiranga' brand of Gutkha were received in the transport company at Kanpur for transportation to various destinations during the period April‟07 to Nov'07, which was also confirmed by Shri Uma Shanker Awasthi, in his statement dated 28.01.10. For further corroboration, enquiries were made with the raw material suppliers, at manufacturers end, electricity consumption and in respect of actual production capacity. On the basis of the above 8 Excise Appeal Nos.167-169 of 2012 evidences, it was concluded that party has suppressed the production and has cleared the goods clandestinely as per the Chart prepared in this regard Accordingly, a show cause notice was issued demanding duty of Rs. 80,47,336/- from M/s Kaya Fragrance Pvt. Ltd. and Rs. 81,16,710/- from M/s Hi-Choice Collection Pvt. Ltd.
.........
Now I proceed to decide the core issue of clandestine removal of finished goods i.e. 'Tiranga' brand of Gutkha by the party, which has been alleged by the department on the basis of private records resumed from the premises of transporter, namely, M/s. Bihar Carrying Co., Kanpur. It is understood that in the case of demand of clandestine removal of finished goods on the basis of private records recovered from any third party, it s essential to corroborate the evidences so relied upon, in a composite manner, particularly to match the same with the essential parameters of manufacturing, such as purchase and consumption of excess raw materials, the production capacity, the labour employed, excess/shortage of stocks, excess electricity consumption suppression of production, payment of extra/unaccounted freight on procurement of such raw materials or dispatch. of such unaccounted finished goods, sale pattern and money flow back, as far as possible. In the instant case, the department has conducted follow up enquiries mainly at the ends of the transporter, the raw material suppliers and the manufacturer for ascertaining the quantum of such evasion. In order to meet the end of justice, it is necessary to analyze all the evidences one by one, starting with the evidences at the transporters end, which have mainly been relied upon in this case.
Evidences at the ends of the Transporter's namely M/s. Bihar Carrying C o. Kanpur:9 Excise Appeal Nos.167-169 of 2012
During the search at the office premises of M/s. Bihar Carrying Co., Kanpur, the two main private records of transporter viz. Private Diary Pad' and 'Loading Registers' were found. It has been alleged by the department that these private documents contains the details of the consignments of Tiranga' brand Gutkha booked from Kanpur to various stations / destinations. The demand has been made on the basis of these records and by corroborating them with the statements of the three employees of M/s Bihar Carrying Co., namely Shri Uma Shanker Awasthi, Manager, at Kanpur office, Shri R.P. Singh, Clerk, at Kanpur office and Shri Udai Kumar Singh Manager, at Ranchi. It is observed that the investigating officers have proceeded to raise the demand on goods cleared clandestinely on the basis of the following facts and criteria, which have emerged during the investigations:
1. The 'Private Diary Pad‟ is the document of receipt of Gutkha in the premises of the transporter, M/s Bihar Carrying Co.
2. The Loading Register is another private document, which contains the record of dispatch from the end of transporter.
3. Certain code names were given to different brands of Gutkha in Private Diary Pad.
4. Entries in the said Private Diary Pad have been made on monthly basis i.e. one page was allotted for one particular month, which was also done for one specific brand of Gutkha.
5. In the Loading Register, for transportation of duty paid goods, the GR's were issued and mentioned against those entries, but for transportation of non-
duty paid goods (clandestine removals), there was only mention of number, which denote the number of bags transported.
10 Excise Appeal Nos.167-169 of 20126. Entries of quantities mentioned in private Diary Pad match with the entries in the Loading Register.
7. The entries in the incriminating private records have been made in the coded names for brands of goods as well as destinations
8. The employees of transporter have deciphered the codes used by them in respect of the destinations as well as the brands, they have also specified the destinations for different brands.
I now proceed to examine the evidences available on record vis-à-vis the defence submissions of the party in this regard. It is observed that the main evidence in this case is the Private Diary Pad, which is said to be the record containing the receipt of the goods at the transporter's end. Since most of the entries made in this record i.e. Private Diary Pad were done in a coded manner three statements of Shri Uma Shanker Awasthi, Manager were recorded on 10.05.2008, 14.08.2008 and 28.01.2010, wherein Shri Awasthi explained in Page 3 of his statement dated 14.08.08 that the code name 'CP' was used for the 'Tiranga" brand of Gutkha by them while making entries in the record of the receipt of goods, viz Private Diary Pad.
The second important evidence in the matter is the Loading Register which contains the record of dispatch from the transporter's end. Since the entries made in this record were also done in a coded manner, Shri Uma Shanker Awasthi, Manager deciphered the same in Page 4 of his statement dt 14.08.08, and explained that three code names i.e. 'CP', CP Goods' as well as 'T' were used for the "Tiranga" brand of Gutkha by them while making entries in the record of the dispatch of goods, viz Loading Register. It was also explained that for 11 Excise Appeal Nos.167-169 of 2012 transportation of duty paid goods, GR's were issued, which were mentioned in the Loading Register against that specific entry, whereas in the case of transportation of non-duty paid goods (clandestine removals), there was no mention of any GR's. It was also stated that in those cases where no description is mentioned, and only number is written, the same pertains to quantity of Gutkha removed clandestinely. He also explained in his statement that in the Loading Register, they used to make the entries of duty paid goods with GR numbers on the top of the page, and below them, the entries of non-duty paid goods have been made.
Now coming to the aspect of tallying the entries of the Private Diary Pad with the corresponding entries in he Loading Register, it is observed that the department has established that an entry of Private Diary Pad gets correlated with the entry of the Loading Register. It is demonstrated in the show cause notice in the following manner:
Deciphering of the contents of the scanned image of Page 23 of the Private Diary Pad:
From the above document, it is revealed that:-
It contains the nos. of bags, destination and the date of receipt of Gutkha for its transportation by Ms Bihar Carrying Company The page, on the top contains the code name 'CP', which has been deciphered in the statement dt.14.8.08 of M/s Uma Shanker Awasthi (RUD No.5), that the code 'CP' refers to "Tiranga" brand of Gutkha The destination of delivery of the consignments has been mentioned in codes viz. RNC, TTN, RM etc., which have been deciphered in the statement 12 Excise Appeal Nos.167-169 of 2012 dt.28.1.10 of Shri Uma Shanker Awasthi (RUD No.7), manager of M/s Bihar Carrying Company, Kanpur.
Deciphering of the contents of the scanned image of Page of date 15.06.07 of Loading Register:-
From the above document, it is revealed that:-
The date of transportation is 15.06.07
Some goods were covered under Builty no.
51208909.
The Code (BGP) represents the destination
Bhagalpur, where goods were sent.
45 bags were transported without any builty/GR to Bhagalpur (BG) 'T‟ shows Tiranga' brand of Gutkha.
On comparison of these evidences, it is noticed that in the said Private Diary Pad, the entry shows that on 15.06.07, a quantity of 45 bags of goods was received for Bhagalpur under the code name of 'CP'. This entry was subsequently corroborated with an entry made in Loading Register on
15.06.07 which also showed that the same quantity of 45 bags of goods were dispatched for Bhagalpur and the code name „T‟ was also mentioned for the goods of Tiranga Gutkha. Regarding the usage of code 'CP' in Private Diary Pad and that of T in Loading Register, it is observed that the codes used in both the records were deciphered by Shri Uma Shanker Awasthi in his statement dt. 14.08.08, wherein he revealed the usage of a single code 'CP' in Private Diary Pad, and the usage of codes 'CP /CP Goods/ T‟ in Loading Registers. Further, it was also observed in both the documents that the code name "BGP'/ 'BG' of destination used was the same. On the basis of this fact- finding, the department concluded that the entries of 'Private Diary Pad" were also available in another/parallel private record of the transporter i.e. 'Loading Registers,' not only confirms the actual execution of these 13 Excise Appeal Nos.167-169 of 2012 transactions, but also confirmed the authenticity of details of various entries in these documents in respect of 'Tiranga' Gutkha Moreover, a few other things were also clarified in the process, such as the Private Diary Pad contained the details of destination of delivery of the consignments in various codes viz. RNC, TTN etc., which have been deciphered In the statement dated 28.01.10 of Shri Uma Shanker Awasthi, Manager of M/s Bihar Carrying Company, Kanpur. Further, in the Loading Register, certain quantity of goods were mentioned as having been covered under the Builty/GR No. 51208909 for 'BGP"
which represents the destination Bhagalpur, where duty paid goods were sent, whereas 45 bags of finished goods were mentioned below the entries of GR's as having been transported clandestinely without any Builty/GR.
On the basis of above correlation and discussions, I find that demand of duty on clandestine removals have been alleged on the basis of records resumed/tendered by the transport company viz. 'Private Diary Pad' and 'Loading Register' with coded names of brands & destination and the same have been confirmed and deciphered by the statements of employees of the transporter The department has established their case on the basis of statements of key person Shri Uma Shanker Awasthi, Manager of the transport company. His statements were recorded on the date of search and also later-on during the course of investigations in order to clarify the manner of maintenance of records, deciphering of codes allotted to various brands of Gutkha and destinations and to establish the modus-operandi adopted by the party I observe that the party in its defence has strongly pleaded that the entries in such records refer to only number of bags, destination and receipts of Gutkha and no transporter can transport goods without indicating the name of consignor as well as consignee; and without 14 Excise Appeal Nos.167-169 of 2012 specifying the weight; and above all without issuance of GR/consignment note. On this aspect, it is observed that the transporter has mentioned the code CP on top of the Private Diary Pad, establishing that the goods belonged to the party, as the code CP has been given to the goods 'Tiranga' brand of Gutkha, manufactured by the party, who happen to be the consignors, in this case. Further, It is also found that the mentioning of he quantity of goods is a mandatory requirement while transporting the-goods, and in this case, these numbers have clearly been mentioned in all incriminating records resumed and relied upon in this case, whether mentioned with the GR numbers (in case of duty paid clearances), or not (in case of clandestine clearances). Regarding the aspect of GR notes, it is on record that when the staff of the transporter himself have discussed to clandestine clearance of Gutkha of the brand Tiranga, and has explained the modus- operendi of the same, and even correlated the entries of the record of receipt of goods in their premises with the record maintained for dispatch of the same goods, I do not find sufficient force in the defence of the party that goods cannot be transported without issuance of GR/consignment note.
Furthermore, It is noticed that departmental case is based mainly on the basis of Private Diary Pad and Loading Register resumed and tendered at the time of search and also corroborated by Shri Uma Shanker Awasthi, Manager of M/s Bihar Carrying Co vide his statements dated 10.05.2008, 14.08.2008, and 28.01.2010. It is noticed from the records resumed. from the transporter especially the Loading Registers, which does not uniformly designate one particular code for any brand of Guthka in terms of submission made by various employees of transporter in their statements recorded and relied upon. This observation leads to a contradictory situation and in order to understand private records i.e. Private Diary Pad, 15 Excise Appeal Nos.167-169 of 2012 Loading Registers and to assimilate the findings of investigation projected in the SCN, the examination of various statements of the employees of the transporter is therefore required. In the statement dated . 10.05.08 Shri Uma Shanker Awasthi, Manager has stated that "CP goods" stands for Sir brand of guthka and later clarified in subsequent statements dated 14.08.08 that this code has been assigned to 'Tiranga' brands of gutkha etc. Similar contradiction has also been noticed in the allotment of page numbers in Private Diary Pad. By going through various explanations, submissions etc. about basic fact regarding the description of goods assigned for identification of different brands of gutkha for the purpose of evaluation of duties, it is felt that though the statements of Shri Uma Shanker Awasthi recorded on different dates gives different versions and has thus induced inherent contradictions when read together with all the statements given by him on different dates as well of as other employees of the transport company on the issue of deciphering the codes in Loading Register and also regarding allotment of page numbers of Private Diary Pad. However at the same time, no apparent ambiguity at least has been noticed in respect of code names deciphered by Shri Uma Shanker Awasthi for the description of Tiranga brand Gutkha coded as CP in the Private Diary Pad, based on which the Chart-4 has been consolidated for arriving at clandestinely removed goods.
Evidence at the Raw Material Suppliers End :
I feel that it is a known fact that there are four basic ingredients required for manufacture of Gutkha i.e. Tobacco, Kattha, Supari/ betul nut and the packing material laminates. In the instant case, department has conducted enquiries in respect of all the four items and recorded the statements of the key persons. The relevant 16 Excise Appeal Nos.167-169 of 2012 portions of the statements have been discussed here-in- below .......
On going through all these statements recorded by the department and the defence contentions, I find that the raw materials suppliers have stated that they had also been engaged in supplying raw materials to the Gutkha manufacturers, by taking such payments on cash basis. They have also stated that such transactions are never entered in their statutory records. However in this case, the investigation has not been able to convincingly bring on record the excess or shortage of any raw materials either at the suppliers premise or at the manufacturer's premises, and further, no evidence of transportation of raw material from the supplier's premises to party's premise was produced, also there was no evidence of any money flow back, or of payment for excess purchase. Therefore, by merely concluding that all the raw material suppliers have also sold goods on cash payment without there being any entry in party's ledger as cash purchase, does not established that party have purchased excess raw material. Unless further investigations to corroborate. allegations would have caused and yielded desired evidences in this regard.
In view of the above discussion, it is observed that though the possibility cannot be ruled out that the said raw materials had in-fact been purchased on cash payment basis by the party over and above the recorded volume, but department could not adduce any cogent and convincing evidence against the party, Also, the department could not consolidate the same by recovering any supporting documents/evidence which would corroborate these allegations.17 Excise Appeal Nos.167-169 of 2012
Evidence at the Manufacturers End & Determination of Production Capacity:
I observe that enquiry was also made with the manufacturer and a statement of Shri Manish Kanodia, Diretor was recorded on 03.02.10. It has been alleged by the department that in his statement, Shri Kanodia accepted that Tiranga' Gutkha might have been transported to Bihar and Jharkhand by M/s Bihar Carrying Company, Kanpur as per choice of the customer. He also accepted hat Shri Sunil might have been a contractor, who used to ensure transport of Gutkha from factory to transport company, as stated by Shri Uma Shanker Awasthi.
The party on the other hand has contested and denied all the allegations made in the show cause notice in this regard, by submitting that Shri Manish Kanodia has stated in his statement that he sells goods at ex-factory gate on cash payment; that there is no evidence to prove that goods were transported by the party; it is neither the duty nor obligation of the party to chase the goods up to the level of transport of goods or consumption of goods; specific name of the person who has purchased to goods on principle to principle basis on and the person who has booked the goods from respective transport is illusory and has no concern with the party. Further, in respect of Shri Sunil, it was stated by Shri Kanodia that he might have been a contractor, and presently they do not have any knowledge about Shri Sunil.
In the statement of Shri Manish Kanodia, Director of the unit there is no acceptance with regards to the real identity of Shri Sunil, the person who was alleged to have booked the Gutkha at the transporter's premises rather Shri Kanodia has stated that Shri Sunil might have been a contractor. It is further noticed that department has stated that Shri Sunil, was arranging transportation and paying 18 Excise Appeal Nos.167-169 of 2012 freight on behalf of party, but could not find any evidence to prove that Mr. Sunil was an employee of the manufacturer or was in any way connected with them. It is also noticed that no investigations in this regard were conducted to gather evidence in order to prove that Mr. Sunil was in any way connected to the party. In his statement, Shri Uma Shankar Awasthi, Manager of Bihar Carrying Company has stated that Shri Sunil was the person who was arranging and paying the freight and they communicated with Shri Sunil only. However, department has not investigated Shri Sunil, and no whereabouts of Shri Sunil are mentioned in the SCN which would have been significant in order to corroborate and establish clandestine transfer of goods from factory to customer through transporter. Thus missing out on this aspect has resulted in non-surfacing of critical facts to cement the leakages of the allegations regarding clandestine removal.
Further, another important point raised by Shri Kanodia in his statement is that they were effecting ex-factory gate sales on cash payment basis to their respective bonafide purchasers of the goods; and that it is neither their duty nor obligation to chase up the goods up to the level of the transport and / or upto the level of customer of the said goods. It is observed that the issue of ex-factory sale was neither contested nor deliberated by the department, in the SCN. Also no evidence was put-forth by the department to prove that the party was directly connected in selling the goods upto the ultimate consumer. It is also noticed that the department has alleged that goods transported on GR's were those which were cleared by the party on payment of duty and details of which are available in the Loading Register, whereas the goods against which no GR's were mentioned were those cleared clandestinely. However, since there were numerous entries 19 Excise Appeal Nos.167-169 of 2012 in the Loading Register which carried the GR number, it can safely be presumed at this juncture that even sufficient quantities of duty paid goods had in-fact been transported through the said transporter. Strangely so the name 'Tiranga' brand even in the transportation of duty paid goods has not been shown in private records. It is also. found that Shri Kanodia has stated in his statement that "he is unable to offer comments on the duty paid nature of Goods mentioned in Chart-4". When there is clear-cut distinction in the entries made in Loading Register, in duty paid goods (those having GR mentioned) and non duty paid goods (without GR number), and in absence of any clear-cut denial by Shri Kanodia, it is apparent that there was some element of doubt in his mind regarding the duty paid nature of such goods, and therefore he could not out rightly refute the allegation of non duty paid nature of said goods.
Now coming to the aspect of determination of actual production capacity in the factory premises of the party, It is found that the department has alleged that Shri Manish Kanodia, Director of the unit in his statement has stated that his firm was manufacturing Tiranga brand Gutkha; and that there were different number of pouch packing machines installed in their factory premises at different times, which varied in the ranges 70 to 26 in different periods; and that the speed of machine was 120 to 130 pouches per min; and the number of employees were between 60 to 80 on daily wages basis. He also stated that normal working Hrs were from 10 AM to 5 PM, and manufacturing was also done in the second shift from 5 PM to 10 PM as per demand. To consolidate the department contention, a visit was also undertaken by the officers in the factory premises on 04.11.09, on the basis of which it was alleged that the speed of machine was found`to be as 240 pouches per min, and thus, approx. 8236800 pouches or 14826.24 kgs of Gutkha was 20 Excise Appeal Nos.167-169 of 2012 produced per machine per month, which was over & above by 95% of the recorded production. It was alleged by the department that the said quantity was produced and cleared clandestinely.
On the other hand, the party challenged the method of arriving at the production capacity and consequential higher production and clearance. They contested that the speed of machine was calculated hypothetically and cannot be taken as admissible evidence. They stated that at that time compounded levy scheme was in force which itself reads speed at 180 pouches per min.; the computation has been done by presuming that machines were running for round the clock in full swing and without considering any holidays and no wastage was accounted. The conclusion was drawn without verifying facts from the party i.e. no statement was recorded in this regard.
In order to ascertain the facts, the Panchnama 04.11.09 drawn at the time of visit of the departmental officers in the factory premises of the party to check the actual production capacity has been examined and it is found that in the said Panchnama, it has been mentioned that speed of machines was taken for verification which was found to vary from 209 to 240 pouches per minute. The working hours were also mentioned as one shift of 3 hours, subject to change as per the market requirement. However, at the time of visit of the officers, no stock taking was done, neither for finished goods nor for the raw materials. Shri Manish Kanodia, Director was present on the spot, yet his statement was not recorded. It is observed that while computing the total production on the basis of speed so ascertained, the highest speed recorded was taken, instead of resorting lo averaging method, and moreover, no wastage was taken into account. The department has proceeded to calculate the production on the basis of working of 22 hours per day and 26 days per month, 21 Excise Appeal Nos.167-169 of 2012 without corroborating of numbers of labours employed or electricity consumed.
It is also observed that as far as electricity is concerned, it was alleged that huge power consumption was evident from the presence of high capacity DG Set and therefore on the basis of load sanction and presence of high power DG set allegation was arrive at but no evidence has been adduced regarding excess power consumption or tampering of electricity meter or any of power theft. Further, no enquiry was reflected in the SCN in respect of labour employed for manufacture of such a huge quantity of alleged un-accounted production. In these facts and circumstances, it is difficult to place reliance on the determination of actual production capacity and the manner in which quantum of production has been determined. Thus, the conclusion to the extent as mentioned above and arived at by the department on 04.11.09, at the time when the party was working under compounded levy scheme cannot be given desired reliance. However, the fact remains that possibility of suppression of production cannot be ruled out as he exercise undertaken by the department indicates the use of high speed machines and long working hours prevalent in gutkha industry QUANTIFICATION OF DUTY ON THE BASIS OF C HA RT-4 Now coming to the quantification of alleged clandestine clearance and calculation of duty thereof, as proposed in the SCN, it is observed that duty calculation has been made on the basis of Chart numbered as '4' .
CHART-4: The said Chart is prepared on the basis of entries in Private Diary Pad for the period April' 07 to Nov.' 07 showing clearance of 2330 (1160+1170) bags of Tiranga brand Gutkha attracting duty to the tune of Rs.22 Excise Appeal Nos.167-169 of 2012
80,47,336/- against M/s Kaya Fragrance Pvt. Ltd. and Rs.81,16,710/- in respect of M/s Hi-Choice Collection Pvt. Ltd..
On the basis of the statements ot Shri Uma Shanker Awasthi, Manager and the statement of Shri R.P. Singh, Clerk of the transporter, and by taking into account the deciphered codes of Tiranga brand of Gutkha as well as their destinations on the incriminating records viz the Private Diary Pad and the Loading Register, the investigating officers has prepared a Chart-4 wherein the evaluation of quantity and assessment of duty was done in respect of the goods cleared clandestinely. On careful examination of the entries of the Chart-4 vis-à- vis the subject relied upon records, it is found that the said Chart is prepared on the basis of entries made on page numbers 8, 18, 23, 29 and 35 of the Private Diary Pad for the period from April 07 to Oct' 07.
However, it is noticed that while examining the pages allotted in Private diary Pad to 'Tiranga' brand of Gutkha manufactured by the party, Shri R.P. Singh in his statement dt. 20.11.08 has allotted page number 5 to both Tiranga brand of Gutkha, as well as Shikhar brand of Gutkha . Moreover, Shri Uma Shanker Awasthi in his statement dt. 10.05.08 has allotted page number 5 to Shikhar brand of Gutkha, whereas subsequently in his statement dt. 14.08.08, he had detailed the entries of page number 5 for Madhu Sweet Supari. It is observed that there has been definite incoherence, contradictions and confusion in the allotment of page number 5 to proper brand of Guthka, and this is apparently the reason that while computing the Chart and raising demand against the party, all the entries of page 5 have not been taken into consideration by the investigation in this case 23 Excise Appeal Nos.167-169 of 2012 and hence there appears to be no need to take cognizance of this issue Further, on examination of relied upon documents, especially the Private Diary Pad and the Loading Register on which the demand of clandestine removal of goods is based, it is observed that there are contradictions or corrections in the statements of employee's) of transporter. But as far as the identification of the goods belonging to the party (Tiranga) is concerned, though there have been contradiction in terms of deciphering codes perhaps due to inconsistencies in the submissions in the statements [for instance, allotment of code 'CP Goods' to Sir Gutkha, as well as to Tiranga Gutkha), yet the fact remains that there is one definite and categorical identification of ccde "CP" for Tiranga as far as Private Diary Pad is concerned has been concluded. Accordingly, there has been a definite confirmation of pages allotted to the said brand/party (i.e. numbers 8, 18, 23, 29 and 35) of RUD i.e. 'Private Diary Pad' which has been taken into consideration for quantification of clandestine removal of goods as alleged in the SCN in respect of demand raised therein as computed in Chart-4. Since, only the entries of specific pages of Private Diary Pad have been taken where the code "CP" has been clearly mentioned which is free from any doubt, there has been no contradiction with regards to the allotment of code "CP" (referred to the Tiranga brand of Gutkha) while identifying the brand name as well as the quantification done by the department on the basis of resumed records. Thus, I am of the considered view that there appears to be sufficient clarity to this an extent though further corroboration and admission by the party and others as required in the cases alleging clandestine removal have not surfaced and reported.24 Excise Appeal Nos.167-169 of 2012
While going through this Chart, it is observed that Chart-4 is based only on those entries in Private Diary Pad in which separate pages have been used to record the receipt of Tiranga brand of Gutkha at M/s Bihar Carrying Company for transportation to various destinations. The Private Diary Pad is the record of receipt of goods in the transporters premises and the department has concluded ts finding in terms of computing the duty liability solely on the basis of the findings that code "CP" has been given to 'Tiranga' brand of Gutkha; and each such page bears the code "CP' on the top. pertaining to a particular month. It is also noticed that destination in the coded form is also mentioned in the said Private Diary Pad. These destination codes mentioned in the relevant pages of Private Diary Pad are RNC (Ranchi), TTN (Tata Nagar), BGP (Bhagalpur) and BTH (Betiah), which also happen to be the same four stations mentioned by Shri Uma Shanker Awasthi in answer 8 at page 4 of his statement dated 28.01.10 and also confirmed by Shri R.P. Singh in answer 2 at page 2 of his statement dated 20.11.08. I have carefully gone through the format of the Chart-4 (on the basis of which the entire demand has been raised), and I find that there are three columns in the said Chart, namely:
• Date i.e. date of receipt of goods in the premises of M/s Bihar Carrying Co.;
• Station i.e. the destination to which the goods are to be transported • Quantity/ bags i.e. quantity of Tiranga brand Gutkha The entries incorporated in Chart 4 have been done properly, as all theentries in respect of the dates, quantities and the destinations are tallying with the entries made on page numbers 8, 18, 23, 29 and 35, allotted to Tiranga brand Gutkha in the Private Diary Pad. Thus, there is absolute clarity in arriving at the quantum of 25 Excise Appeal Nos.167-169 of 2012 clandestine clearance and also a definite confirmation of description of goods as well as destination in Private Diary Pad, in respect of the demand (Chart-4) which appears to be sustainable provided it corroborates with other documents including the record of dispatch, i.e. Loading Register etc. Now, I take up the issue of corroboration of entries of the Private Diary Pad with the entries of Loading Register to check as to whether they both corroborate with each other or not? It is observed that one instance of corroboration of both these records has already been done by the investigation which has been explicitly mentioned in the show cause notice, with regards to entry dated 15.06.07 wherein quantity of 45 bags of goods was dispatched for a Bhagalpur under the code name of 'CP'.
The matter of further corroborations with regards to sample entries in each of the pages numbered 8, 18, 23, 29 and 35 of the Private Diary Pad are detailed below:
• At Page 8 of the Private Diary Pad, there is an entry of receipt of 20 bags on 26/4 for transportation to Ranchi. Similarly, at page 45 of the Loading Register, on 26,04.07, 20 bags were transported from Kanpur to Ranchi by Truck No. HR46-7636 • At Page 18 of the Private Diary Pad, there is an entry of receipt of 20 bags on 1/5 for transportation to Ranchi. Similarly, at page 53 of the Loading Register, on 01.05.07, 20 bags were transported from Kanpur to Ranchi by Truck No. CG12-ZC- 1381.
• At Page 23 of the Private Diary Pad, there is an entry of receipt of 45 bags on 11/6 for transportation to Ranchi, and 30 bags on 12/6 for transportation to Tata Nagar. Similarly, at page 109 of the Loading Register, on 12.06.07, 75 bags were transported 26 Excise Appeal Nos.167-169 of 2012 from Kanpur to Ranchi and Tata Nagar by Truck No. CG04-ZC-7012.
• At Page 29 of the Private Diary Pad, there is an entry-of receipt of 45 bags on 16/8 for transportation to Ranchi. Similarly, at page 197 of the Loading Register, on 16.08.07, 45 bags were transported from Kanpur to Ranchi by Truck No. UP67-5651 with mention of code CP as well.
• At Page 35 of the Private Diary Pad, there is an entry of receipt of 30 bags on 02/10 for transportation to Ranchi. Similarly, at page 45 of the Loading Register, on 02.10.07, 30 bags were transported from Kanpur to Ranchi by Truck No. JH05-S-6251.
On the basis of the above findings, the entries as mentioned in the Private Diary Pad tally with the dispatch entries as detailed in the Loading Register which are also in accordance with he quantification as detailed in Chart-
4. therefore hold that there is sufficient coherence between the two sets of documents recovered from transporters premises i.e. Private Diary Pad and loading register to indicate allegations that clandestine removal of goods had actually been effected by the party through M/s Bihar Carrying Co, Kanpur, and therefore the demand of duty as raised in this matter appears to be sustainable.
It is further observed that there have been certain contradictions in the deciphering/ clarifying of the facts, as evident from the statements of the key persons of the transporters in this case. The said anomalies are reproduced as under:
• The page no 5 of Private Diary Pad is said to be allotted to Shikhar brand Gutkha and Madhu Sweet supari by Shri Uma Shanker Awasthi, whereas it is allotted to Tiranga as wel as Shikhar brands of Gutkha by Shri R.P. Singh, bcth these persons being the employees of the transporter.27 Excise Appeal Nos.167-169 of 2012
• Similarly there has been some contradiction in respect of deciphering the codes in Loading Register, in as much as Shri Uma Shanker Awasthi has stated that CP Goods' denotes the goods of Tiranga brand at page 4 of statement dated 14.08.08, whereas at another instance at page 3 of statement dated 10.05.08, the same is stated by him to be in respect of Sir Gutkha It is observed that fortunately as far as demand of duty in respect of Tiranga brand Gutkha is concerned, the said page number 5 of Private Diary Pad has not been taken into consideration in Chart - 4.
Also the Chart-4 is prepared on the basis of Private Diary Pad wherein only the code "CP" has been mentioned, and there is no ambiguity in any statement of any employee in respect of the said code "CP". Further, all the entries of the said Chart does match with the entries of Loading Register in terms of explanation provided by transporter's employees.
It is further observed that although the case has been concluded and established largely on the basis of two main incriminating records pertaining to receipt and dispatch of Tiranga brand Gutkha at the transporters prernises, duly explained and supported by the statements of the key persons involved in such acts, yet primary or supportive evidences have not been put forth relating to many vital aspects of the case are concerned. It is also observed that while establishing the case of clandestine removal of such magnitude, the evidences are required to be established by the excess supply of raw materials, proof of excess production,: receipt of goods at the consumer end is concerned employment of labour, consumption of electricity cr other secondary evidences to prove 28 Excise Appeal Nos.167-169 of 2012 suppression of production, evidences relating to clandestine removals including vehicle driver(s) details and submissions, receipt of goods at consumer's end, flow back money transactions etc. In the instant case, these corroborating links and evidences could not be mobilized and projected, but at the same time, there are evidences pointing towards suppression of production and subsequent removal of goods without payment of duty. There concrete evidences of clandestine clearance are in the form of private records maintained at transporter's end, duly corroborated with the statements of the key persons of transporter. It is not always possible for the investigation to establish all links in such a case of systematic evasion of such a magnitude.
It is further observed that irı a case involving detection of evasion of duty the Apex Court in the case of Collector of Customs Vs D. Bhoormull 1983 (13) ELT 1546 (SC) has held that .......
With regard to the party's contention that the department's case is built upon on statements of the third party, it is observed that aforesaid case laws makes it sufficiently clear that charges of clandestine removal are sustainable in such cases as well. It is further observed that none of the five statements of three different persons of transporters firm from whose premises such documents have been recovered, recorded in a span of approximately a little less than two years has been retracted, which confirms that the said statements indeed have evidentiary value.
Further, the Hon'ble High Court of Madras in the case of Assistant Collector of Customs, .......
....... ..
29 Excise Appeal Nos.167-169 of 2012In the present circumstances of the case, statements of different persons of transporter along with the incriminating resumed records from transporter's premises and also relied upon, have been distinctly corroborated. The evidentiary value of the statements has also been examined and it is found that they are corroborative and are supportive, leaving little and insignificant gaps in their correlation, as far as demand on Tiranga brand Gutkha are concerned. The investigations have clearly brought out the aspect of quantification of clandestine removal done by the party. It is on record that the statements of different persons were recorded at different times and all the persons tendered their statements voluntarily to the best of their knowledge. A number of employees of transporter were called for on different dates for recording their statements before the officers and some persons were also called twice or thrice but all of them tendered their statements. Though there have been modifications, corrections and improvements as well but the basic fact of acceptance of clandestine removal remained unchanged and un-retracted, On examination of all the aspects as alleged in the Show Cause Notice denial of the party and analysis made in aforesaid paragraphs, it is observed that though issues relating to various aspects of movement of raw material from raw material supplier upto receipt of finished goods to the consumer/customer have not been examined and investigated in a composite manner, however, the fact remains that the documents recovered highlight the receipt and dispatch of goods at transporter's premise in clandestine manner which has also been corroborated through employees of transporters.
While entire modus operandi is unearthed and
discovered by investigation at the transporters
premise, yet some of the doubts remains
30 Excise Appeal Nos.167-169 of 2012
unanswered for instance, assessee affecting ex- factory sale, non-examination & confirmation of vehicles/drivers transporting goods etc However, it is understood that the resumed documents relied upon nave been " explained sufficiently which also corroborates with the statements of persons managing the operations at transporter's end, the aspect of clandestine removal of goods as quantified in Chart-4 gains favours and thus gets established. More so, because the identification regarding description of goods and destinations in these documents on the basis of which chart-4 has been prepared suffers with limited contradictions which can perhaps be ignored keeping in view the entire scheme of clandestine removal as adopted by the party in connivance with the transporter etc. I notice that the Counsel of all the party nos. 1, 2 and 3 of the show cause notice has requested for cross- examination of the employees of transporter in their defence submissions, as well as during the proceedings of personal hearing also on the basis of the fact that the statements are computer typed and tailor made. In this regard, I have specifically gone through the statements of the key persons, Shri Uma Shanker Awasthi and Shri R.P, Singh on the basis of whose evidences the case has been built up. It has been observed that the first two statements of Shri Uma Shanker Awasthi are hand written by him, whereas only the third and the last statement is computer typed. It is pertinent to mention that this third statement has been taken approximately 20 months later. Similarly, the sole statement of Shri R.P Singh is hand written, and not computer typed. In the present circumstances of the case, statements of different persons along with the incriminating resumed records, relied upon, are available, which are worthy corroboration and therefore the evidentiary value of the statements has been examined 31 Excise Appeal Nos.167-169 of 2012 leaving very little gaps in their correlation; the investigation have brought out clearly the quantification of clandestine removal done by the party.
In this case, the main evidences have been collected at the end of the transporter, and the said documentary evidences have been explained and accepted by the concerned employees of the transporter, and in the process revealed the modus-operandi adopted as far as the mechanism in transportation of the goods (non-duty paid) is concerned. Further, the investigations conducted as concluded in the SCN took a period of about two years to complete, and it is observed that the said employees have fully cooperated with the investigation, have stuck to their stand, and also have not retracted from any of their statements. In view of the same, the demand has been computed on the basis of correlated facts not in dispute, and the statements which have never been retracted. Therefore, I do not favorably consider the relevance of cross examination of the employees of the transporter in this case. I find that there are numerous cases where it has been laid down that granting of cross examination always depend upon the facts and circumstances of each case. The Hon'ble Apex Court in State of Kerala vs. Shaduli [AIR, 1997 SC (62)], took the view that 'It can hardly be disputed that Cross- examination is one of the most efficacious methods of establishing truth and exposing falsehood..whether ross examination should be allowed or not will depend upon the facts and circumstances of each case and in one situation it may be allowed while in another case it may not be".: It has also been upheld in the case of M/s. Poddar Tyres (P) Ltd.vs.Commissioner [2000 (126) ELT 737 (Tri.)] that cross examination, as such, is not a part of natural justice but only that of procedural justice and that cross examination is not a mandatory procedure to be allowed 32 Excise Appeal Nos.167-169 of 2012 in all cases. Further, the same view was taken by the Hon'ble Tribunal in the case of Liyakat Shah vs. CCE Indore-Il (Bhopal) [2000 (120) ELT 556 (Trib.)]. Further the Apex Court had also taken a view that cross- examination might be allowed considering the circumstantial evidences and the same is not binding on the adjudicating authority for each and every case. Thus, cross examination is a useful procedural mechanism to arrive at the truth; by probing questions it can be used to sift through layers of seemingly opaque facts to arrive at the true picture of a transaction. At the same time, cross examination before a quasi judicial authority is fraught with the very real possibility of its misuse, since such authority has no power to order contempt. Moreover, it is a reasonable expectation that when cross examination takes place after a long passage of time, the chances are bright that the person concerned has been persuaded to change his mind and statement. This is not mere conjecture, but a fact since it is true that while the Department officers have access to the said person for limited ime proximate to the cause of action, those in the trade are in regular touch and develop both personal and business affinity. Hence, for these reasons, even the Apex Court observed that cross examination is not to be allowed in every situation. Therefore, the relevance of the cross examination has to be carefully examined in context of the case and importantly in the background of the legally acceptable records such as panchnama, statements etc, that are created proximate to the event of booking the case. In view of the above guidelines, I do not find any justification of allowing cross-examination in the circumstances of this particular case, and accordingly the said request of the party has been denied.
In view of above findings and by taking into consideration the evidences on the basis of which the clandestine removal has been quantified and concluded, and also 33 Excise Appeal Nos.167-169 of 2012 keeping in view the defence submissions on the issue of cross examination and reliability of statements, I hold that there is sufficient evidence to establish the allegations hat clandestine removal of goods had actually been effected by the party through M/s Bihar Carrying Company Pvt Ltd., Kanpur, and therefore the demand of duty on the clearance of 2330 (1160+1170) bags of Tiranga brand Gutkha, attracting duty to the tune of Rs 80,47,336/- against Ms Kaya Fragrance Pvt. Ltd. and Rs. 81,16,710/- in respect of M/s Hi-Choice Collection Pvt. Ltd. is sustainable ..........
Now coming the penal provisions, I notice that penalties have been proposed by the department upon the both the parties M/s Kaya Fragrance Private Ltd. and M/s Hi-Choice Collection Pvt. Ltd under Rule 25 of the Central Excise Rules 2002, read with Section 11AC of the Act. It has been alleged by the department that both the parties had suppressed the fact of unaccounted production and clandestine removal of Tiranga brand Gutkha, with intent to evade payment of duty. It was only on the basis of recovery of incriminating documents at the business premises of the transporter of M/s Kaya Fragrance Pvt. Ltd and M/s Hi-Choice Collections Pvt. Ltd and subsequent investigation by the officers, that the allegations of such clandestine removal of gutkha were established. Since the parties have been indulged in wilful suppression of facts and mis-statement with intent to evade the payment of Central Excise Duty, they are liable to penal action as proposed in the SCN. The parties on the other hand contested that show cause notice is failing cn both merit as well as limitation, that mandatory penal provision under Section 11AC of the Act, is not invokable in the case as there is no case of willful mis-statement / fraud/ 34 Excise Appeal Nos.167-169 of 2012 suppression/ collusion with intent to evade payment of duty.
In the instant case, it is noticed that the evasion of duty has been made in a scrupulous manner and the modus- operandi has been unearthed by the department and in the process certain incriminating documents were recovered from the transporters premises and statements of different persons of the transporter along with the statements of the Director/ Authorised Signatory have been taken. The corroboration of these incriminating documents has been established and accordingly investigations have brought out clearly the willful intend committed by the parties by way of suppression of production and hereafter clandestine removal of the same by mis-stating the facts. The Section 11AC provides that "Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis- statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub- section (2) of section 11A, shall also be liable to pay a penalty equal to the duty SO determined" In view of the above am of the opinion that penalty upon M/s Kaya Fragrance Private Ltd. and M/s Hi-Choice Collection Pvt. Ltd under Rule 25 of the Central Excise Rules 2002, read with Section 11AC of the Act is imposable in the instant case.
Now coming to the aspect of proposed penalty upon Shri Manish Kanodia, Director of the party under Rule 26 of the Central Excise Rules, 2002, It is noticed that the department has alleged that Shri Manish Kanodia was the key person behind unaccounted removal of 'Tiranga' brand Gutkha from his units and he was actively involved 35 Excise Appeal Nos.167-169 of 2012 in manufacturing, depositing, removing and selling of unaccounted excisable goods, namely Gutkha, without cover of Invoice and without payment of duty. Further, he was the main financial beneficiary from this evasion of Central Excise duty. Therefore, on account of his above mentioned active involvement in evasion of Central Excise duty, he is liable for penal action under Rule 26 of the Central Excise Rules, 2002. On the other hand, Shri Manish Kanodia, Director has denied the allegation by stating that the provisions of Rule 26 of the Rules, ibid, are not applicable in the present case in as much as Shri Manish Kanodia have never accepted in this statement any alleged clandestine activity and on the contrary he stressed upon the fact avidly that his factory was effecting clearance ex-factory gate and he was not concerned with the transportation of the goods. He in fact formidably opposed the veracity of the said 'oose documents. They also contested that there are neither any contumacious conduct nor deliberate violation of fiscal statute, therefore penal provisions are not applicable in this case.
On going through the facts of the case, it is found that that M/s Kaya Fragrance Pvt Ltd and Mis Hi-Choice Collection Pvt. Ltd. were engaged in clandestine removal of 'Tiranga' brand Gutkha. The statement of Shri Manish Kanodia was recorded on 03.02.10, wherein he accepted that he himself is controlling and managing the procurement of raw material and labour production, marketing & transportation etc. of their finished goods. Further, the statements of transporters and suppliers of tobacco, supari and packaging materials were recorded on various dates, on the basis of which it is revealed Shri Manish Kanodia, Director, was exercising overall control and that supervision over business activities of his units. He was monitoring the procurement of raw materials, by giving orders to raw material suppliers on phone, and was also supervising procurement of labour. The production of 36 Excise Appeal Nos.167-169 of 2012 Tiranga brand Gutkha and its sale was also directly supervised by him. He was receiving orders and was supervising sale & dispatch of Gutkha also. It is also revealed that he was the main key person, who took the important decisions. relating to sale of said Gutkha. Therefore, for his above mentioned active involvement in evasion of Central Excise duty, he is liable for penal action under Rule 26 of the Central Excise Rules, 2002 Further, in respect of imposition of penalty on M/s Bihar Carrying Company, ........
Now coming to the provision of demand of Interest under Section 11AB of the Central Excise Act, 1944, I find that the party was indulged in the suppression of production and clandestine removal of goods in a scrupulous manner, as discussed above. It is settled law that when demand of duty is confirmed, the Interest, being inbuilt provision in the law, is also demandable. Therefore,I hold that they are also liable to pay the Interest under Section 11AB of the Act, from the due date of payment of duty upto the actual payment of duty."
4.3 Undisputedly investigations undertaken against appellant 1 and 2 are sequel to the certain searches which were conducted by the officers of DGCEI at the premises of M/s Bihar carrying Corporation (Transporter) on 09.05.2008. On specific query it was informed that the search at the premises of transporter was conducted in follow up of investigations that were being done by the DGCEI against M/s Raghunath International. On the basis of the private records recovered during the search at the premises of transporter and decoding of the same with the help of the Shri Uma Shankar Awasthi, Manager of the transporter further investigations were done leading to these proceedings. On the basis of same set of evidences and statements of the transporter, etc proceedings were also initiated against M/s Raghunath International Ltd., Kanpur and M/s Trimurti Products, Kanpur.
37 Excise Appeal Nos.167-169 of 20124.4 It is also worth noting that the though investigations were also made at the end of raw material supplier and at the end of appellants but impugned order do not find much relevance of the said investigations and have not even relied upon the evidences gathered and investigations made. He even did not found or established any corroboration between these evidences and investigations done at the transporter end. The entire demand has been confirmed against appellant 1 and 2 on the basis of certain private records of the transporter namely M/s Bihar Carrying Co Ltd., and the statements of some of the employees of the transporter specifically Shri Uma Shanker Awasthi. It is also noted that no cross examination of the said employees of the transporter was allowed by the adjudicating authority even though asked for. In fact the statements made by the said employees were also not corroborated by the Appellants during the course of investigation. Thus proceeding against relying on the documents recovered from third party and on the basis of statements of third party cannot be said to conclusive. Even impugned order expresses certain element of doubt. His basis of confirmation even after expressing doubt in the matter is reliance placed by him on the decision of Hon'ble Apex Court in case of D Bhoormull [1983 (13) ELT 1546 (SC)] and similar decisions holding that "32. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts relating to this illicit business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying Section 106, Evidence Act, the burden to establish those facts is cast on the person concerned : and if he fails to establish or explain those facts, an adverse inference of facts may arise against him, which coupled with the presumptive evidence adduced by the prosecution or the Department would rebut the initial presumption of innocence in favour of that person, and in the result prove him guilty. As pointed out by Best in `Law if 38 Excise Appeal Nos.167-169 of 2012 Evidence‟ (12th Edn. Article 320, page 291), the "presumption of innocence is, no doubt, presumptio juris : but every day‟s practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property," though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice.
32. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts relating to this illicit business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying Section 106, Evidence Act, the burden to establish those facts is cast on the person concerned : and if he fails to establish or explain those facts, an adverse inference of facts may arise against him, which coupled with the presumptive evidence adduced by the prosecution or the Department would rebut the initial presumption of innocence in favour of that person, and in the result prove him guilty. As pointed out by Best in `Law if Evidence‟ (12th Edn. Article 320, page 291), the "presumption of innocence is, no doubt, presumptio juris : but every day‟s practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property," though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person 39 Excise Appeal Nos.167-169 of 2012 proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice.
33. Another point to be noted is that the incidence, extent and nature of the burden of proof for proceedings for confiscation under the first part of the entry in the 3rd column of clause (8) of Section 167 may not be the same as in proceedings when the imposition of the other kind of penalty under the second part of the entry is contemplated. We have already alluded to this aspect of the matter. It will be sufficient to reiterate that the penalty of confiscation is a penalty in rem which is enforced against the goods and the second kind of penalty is one in personam which is enforced against the person concerned in the smuggling of the goods. In the case of the former, therefore, it is not necessary for the Customs authorities to prove that any particular person is concerned with their illicit importation or exportation. It is enough if the Department furnishes prima facie proof of the goods being smuggled stocks. In the case of the latter penalty, the Department has to prove further that the person proceeded against was concerned in the smuggling.
34. The propriety and legality of the Collector‟s impugned order had to be judged in the light of the above principles.
35. It is not correct to say that this is a case of no evidence. While it is true that no direct evidence of the illicit importation of the goods was adduced by the Department, it had made available to the Collector several circumstances of a determinative character which coupled with the inference arising from the dubious conduct of Baboothmull and Bhoormull, could reasonably lead to conclusion drawn by the Collector, that they were smuggled goods. These circumstances have been set out by us earlier in this 40 Excise Appeal Nos.167-169 of 2012 judgment. We may recapitulate only the most salient among them."
4.5 In facts and circumstances as recorded in the impugned order where even adjudicating authority had his reservations in respect of the evidences and corroboration of the demand being made, the benefit of doubt should have been given to the appellants. It is also worth noting that the same adjudicating authority has within a month of confirming this demand dropped the demand made on the basis of same statements and evidences recovered for the same transporter during the same search in respect of M/s Trimurti Products Kanpur. As we have noted earlier that on the basis of search made at the premises of M/s Bihar Carrying Co Ltd., proceedings were initiated against appellants, M/s Raghunath International Ltd. and M/s Trimurti Products Ltd. The statements of the Shri Uma Shankar Awsthi solely relied for confirming this demand have not been found to be reliable as has been observed by the Hon'ble High Court of Allahabad in case of M/s Raghunath International. The relevant excerpts from the conclusion of proceedings in these two cases are reproduced below:
4.6 Adjudicating authority had vide his Order in Original No KNP-EXCUS-000-COM-009-2020-21 dated 07.09.2020 confirmed the demand made against M/s Raghunath International Ltd. The said order has been set aside by the tribunal vide Final Order No 70006-70059/2022 dated 18.01.2022 observing as follows:
8. Transporter - Bihar Carrying Co. (P) Ltd.
On 9.5.2008, the search was also made at the premises of the transporter- M/s Bihar Carrying Co. Pvt. Ltd. (BCC), Transport Nagar, Kanpur 96 bags of „Sir Brand‟ Gutka were found for which the Manager of Transport, Mr. U. S. Awasthi could not provide copy of the bills/invoice pertaining to the same. On verification of the name of the manufacturer-as printed on the pouches, it appeared that 57 bags of „Sir Brand Gold Silk‟ were manufactured by M/s Seema Enterprises and 39 bags were manufactured by M/s 41 Excise Appeal Nos.167-169 of 2012 Shankar, and the same were seized under Panchnama, as it appeared to Revenue that these bags have been cleared from the factory of the appellants-manufacturer(s) without payment of duty.
9. Further, Mr. Shushil Gupta, Clerk of assessee in his statement dated 9.5.2008 admitted that he has dispatched 57 bags and 39 bags of Sir Brand Gutka from M/s Seema Enterprises and M/s Shankar respectively, to M/s Bihar Carrying Co. Pvt. Ltd.
10. On the basis of loading registers of BCC for the period April, 2006 to November, 2006, JST slips were found mentioned in the goods manifest and private diary pads, showing transportation of gutka to Ranchi and other destinations. Consolidated chart was prepared by the Revenue. As per chart, it appeared that BCC, Kanpur have transported 17,084 bags and 5095 bags of gutka /pan masala during the period April, 2006 to November, 2007 and December, 2007 to May, 2008 respectively. Such goods it appeared were received by the transporter without bills from the factory of the appellant. ...
.....
34. Transportation through Bihar Carrying Co. Pvt. Ltd., The allegation of Revenue is that during the period April, 2006 to December, 2007, "Sir Brand Gutka/Pan Masala‟ were being cleared clandestinely without payment of duty and then booked for transportation, among others, through Bihar Carrying Co. Pvt. Ltd. ("BCC" in short) to various destinations particularly Ranchi and Tata Nagar. Instead of preparing the normal GRs Note, the goods were dispatched on JST slips by mentioning description of goods in code like H.L. Cloth, Mouth Freshner, Supari, Meetha Masala, under fictitious names of consignor and consignee. Since December, 2007, the practice of use of JST slips were discontinued. Thereafter, in the subsequent period from Feb., 2008 to April, 2008, it is alleged that the goods have 42 Excise Appeal Nos.167-169 of 2012 been transported through M/s. BCC by describing the goods in the Goods Manifest as "Kachri Papad‟. Total demand proposed for the period April, 2006 to April, 2008 was Rs.12,72,32,657/-.
34.1 Ld. Commissioner relied upon the statement of the staff of the transporter, wherein they have stated that they were transporting the "Sir Brand Gutka/pan masala" under JST slips as well as for some other brands. Some of the dealers mentioned in the JST slips, which were also found in loading registers, which contained the details of all the consignments booked and transported by them. It appeared to Revenue that both JST slips as well as loading registers contained date-wise quantities having specific description - code and destination, found in the premises of BCC- Transporter, on the basis of which, identification and segregation was carried out. The ld. Commissioner has observed that the fact of clandestine clearance and transportation by road has also been admitted by Shri Rajesh Agarwal, Authorised Signatory of the three appellants/manufacturers, who has, inter alia, stated that Mr. Sri Prakash Agarwal and Shri Alok Krishan Gupta used to give orders with regard to the quantity of goods for dispatch to a specific party with/without invoice on day-to- day basis. He also stated that Mr. Alok Krishan Gupta used to arrange for the transportation of clandestinely removed goods by road/rail to various buyers. Such statements of Rajesh Agarwal have also been corroborated by the statement of Shri Alok Krishan Gupta. Shri Rajesh Agarwal has also stated that freight for such transportation was paid either by Shri Alok Krishan Gupta or Mr. Shri Prakash Agarwal. Shri Rajesh Agarwal also agreed with the statement of Shri Uma Shankar Awasthi, Depot Manager of BCC at Kanpur. On being shown, the JST slip numbering 1308 resumed from the premises of the BCC office at Tatanagar, Shri Rajesh Agarwal accepted that they have cleared and transported 36 bags of „Sir Brand Gutka/Pan 43 Excise Appeal Nos.167-169 of 2012 Masala‟ and 14 bags of advertisement materials. He also accepted that „Sir Brand‟ goods seized on 9.5.2008 from the premises of BCC, Kanpur and at the Railway Station- Kanpur/Lucknow/Jodhpur have been cleared by them clandestinely. On being shown the chart prepared by the Revenue as per statement and identification by the staff of BCC for alleged clearance of Sir Brand Goods during the period 2006-07 and 2007- 08, Shri Rajesh Agarwal agreed to the same as well as with the quantification of 21879 bags of Sir Brand Gutka/Pan Masala through BCC. Further, reliance was placed on the statement of Shri Alok Krishna Gupta, Director of BEE GEE Projects, who admitted in his statement that he was making the arrangements for the transportation of clandestinely cleared „Sir Brand Gutka/Pan Masala‟, and he was also making the payment for freight and expenses in cash. He was also handling the payment for unaccounted purchase of supari, tobacco, katha and packing materials by the appellants /manufacturers. He used to get instructions either from Shri Rajesh Agarwal or Mr. Shri Prakash Agarwal. He also agreed to the quantification as per the charts prepared by the Revenue on the documentary as well as oral information from the premises of BCC. The statements of Shri Uma Shankar Awasthi, Manager, BCC, Kanpur was also corroborated by Shri R.P. Singh-Booking Clerk, BCC at Kanpur. Further, Revenue made follow-up investigation wih Mr. Naseem Ahmed, Partner of Bihar Trader , Ranchi, who also in his statement admitted that he was in constant touch with Shri Rajesh Agarwal, the Authorised Signatory/Manager of Sir Brand Products and, also admitted to be receiving clandestinely removed goods of „Sir Brand Gutka/Pan Masala‟. He also stated that they were also receiving part of the goods along with invoices. He also stated that he used to visit Kanpur once or twice a month to hand over the cash to Shri Alok Krishan Gupta.
34.2 Further, Shri Narayan Sahu alias Babla, Proprietor of M/s. Gopi Nath Sahu, Tata Nagar was also examined, 44 Excise Appeal Nos.167-169 of 2012 wherein he also stated that he was receiving "Sir Brand‟ goods both with bills and without bills. He used to send purchase orders specifically to Shri Alok Krishan Gupta, who used to dispatch the goods to him through BCC. He used to visit Kanpur periodically to hand over the cash for the goods received without invoice. He also admitted that 36 bags of „Sir Brand Gutka/Pan Masala‟ and 14 bags of advertisement materials were seized at the premises of BCC, Tata Nagar, which have arrived from Kanpur under JST Slip No.1308, as he was not having any licit document of such products, he did not claim the ownership of the goods. The ld. Commissioner observed that the allegation of clandestine removal and transportation of the goods by the appellant/manufacturers stands established from the records found in the premises of BCC, which has been corroborated by the statements of the aforementioned various persons. Ld. Commissioner further observed that the allegation of clandestine removal and transportation by BCC is also corroborated from the seizure of „Sir Brand‟ goods at the premises of BCC, both at Tata Nagar and Kanpur respectively.
34.3 Ld. Commissioner further observed that it is admitted by the staff of the BCC that they were transporting clandestinely cleared goods Gutka/Pan Masala of 5 different brands/ manufacturers and were making entries pertaining to all of them in common set of transport records. Further, observed that the investigation has not laid-down any clear cut identification criteria or parameters for identification and segregation of quantities alleged to be clandestinely removed by the appellant /manufacturers, as have been done in the case of clandestine removal/transportation through Indian Railways. Under such facts and situation and after going through the relied upon documents, the ld. Commissioner has found that segregation and identification is possible only after taking into consideration the details mentioned in their records by the staff of BCC, Kanpur viz.
45 Excise Appeal Nos.167-169 of 2012Shri U.S. Awasthi and Shri R.P. Singh, and further considering the destination to which the goods of a particular brand were being transported. It was further observed that for the purpose of identification as to which consignment pertains to which of the 5 brands of Gutka and Pan Masala, the two main indicators appear to have been used (i) destination and, (ii) description code. Regarding destination based identification, Shri U.S. Awasthi and Shri R.P. Singh in their statements have mentioned and on perusal of the resumed records - JST slips, loading registers, goods manifest and private diary pads, wherein both these destinations (Ranchi and Tata Nagar) are apparent. It was further observed that although „Sir Brand Gutka/Pan Masala‟ was being transported only to Ranchi and Tata Nagar, however, three more brands viz. „Tiranga Gutka‟, „Pan Parag Gutka‟ and „Madhu Sweet Supari‟ were also being transported to the same two destinations i.e. Ranch and Tata Nagar. Therefore, in such a situation, segregation of „Sir Brand Gutka/Pan Masala‟ solely on the basis of the destination alone is not possible.
34.4 The Adjudicating Authority further found that description code is erroneous inasmuch as the codes for goods are the sole pin pointing criteria for identification of different brands of Gutka/Pan Masala. The error in reproducing of description code mentioned in 50 available JST slips, against the corresponding entry in loading registers, puts a serious question mark on the reliability of identification with the help of the loading registers. It is alleged that specific codes are allotted to specific brand of Gutka/Pan Masala. In this case, it is evident that the description codes have been jumbled while mentioning in the resumed /relied upon records. Based on which, the demand has been raised. It has been further observed that the investigation has considered the goods transported under the description code of "CP goods‟, "C.P.‟, "C. Cloth‟, Cotton Cloth, Cloth, Cotton, HDPE, SG, Tobacco or Footwear 46 Excise Appeal Nos.167-169 of 2012 are those pertaining to "Sir Brand Gutka/Pan Masala". Hundreds and thousands of entries with the same or similar description and destination codes have not been considered for inclusion in the Annexure, prepared for computation of demand. There is absolutely no factual or logical reason whatsoever to treat the consignment of goods having ambiguous description codes as being those pertaining to „Sir Brand Gutka/Pan Masala‟. Further, the description code deviced for different brand of Gutka/Pan Masala are not unique for a specific brand, and has been most casually and carelessly used. Ld. Commissioner thus, concluded that the records of the transporter -BCC are not reliable for the demand computation as such. Accordingly, the Adjudicating Authority re-computed the demand of duty for the alleged clandestinely cleared goods through BCC, relying on „Goods Manifest‟ and upheld the demand for Rs.2,88,15,226/- (M/s.Seema Rs.2,76,13,340/- and M/s. Shankar Rs.12,01,886/-).
35. Assailing the confirmation of demand as regards the alleged clandestine clearance and transportation of goods through BCC, it is urged that the ld. Commissioner has taken inconsistent view and has passed a cryptic or self- contradictory order. On the one hand, he accepted the contention of the appellant and held that no credence can be given or reliance can be placed on the transporter‟s documents on account of numerous contradiction(s) or discrepancies. The ld. Commissioner has erred in upholding the demand pertaining to the period Feb., 2008 to April, 2008 based on the transporter‟s documents and "goods manifest‟, which also being third party document or transporter‟s documents, lacks credibility and /or reliability, as such data collected remains uncorroborated with any other independent evidence.
35.1 The appellant have also relied on the ruling/order under similar facts and circumstances in 47 Excise Appeal Nos.167-169 of 2012 the case of Trimurti Products, Kanpur- Order in Original No. 22/Commissioner/ 2011 dated 22.09.2011 (manufacturer of pan masala/ gutka), wherein under similar facts and circumstances, the „loading registers, bill books and goods manifest registers‟ were held to be not reliable documents. Further, the ld. Commissioner has overlooked that the description of goods in the transporter‟s documents is „kachri papad‟ (in the „goods manifest‟) which does not constitute even a prima facie reliable evidence to conclude that "Sir Brand Gutka/Pan Masala was being transported clandestinely by BCC. Apart from the goods manifest, no other records such as loading registers, lorry receipt/bill book have been relied upon to corroborate that the "Sir Brand Gutka/Pan Masala" was being transported in the guise of Kachri Papad.
35.2 The ld. Counsel for the appellant further urged that the alleged modus operandi of transporting the "Sir Brand‟ goods under the guise of "Kachri Papad‟ is based on conjectures and surmises and the demand is presumptive. There is admittedly no evidence that the appellants were packing their products with the outer package labelled as "Kachri Papad‟. In spite of two searches made in the premises of the appellant/manufacturers, Revenue has not found any evidence in support of their allegation. It is further urged that so called relied upon „goods manifest‟ nowhere mentioned the name of any of the appellants/manufacturers as consignor/consignee. There is also no mention of the name of the alleged buyer of the goods, alleged to be „Sir Brand Gutka/Pan Masala‟. The investigation has with a pre-meditated mind, listed all such consignments having description of Kachri Papad, having destination Tata Nagar/Ranchi, have presumed to be clandestine removal of „Sir Brand Gutka/Pan Masala, only on the basis of statements. Such statements not being voluntarily or freely given, but being tutored and/or given 48 Excise Appeal Nos.167-169 of 2012 under duress, are not reliable. Such statements did not stand the test of cross-examination. Further, in absence of any corroboration with the records of the appellant, no demand can be fastened on these appellants, based on the third party records and/or statements. It is further urged that such transporters were transporting „Kachri Papad‟ on behalf of numerous consignors/consignees. Further, BCC was also admittedly transporting Gutka/Pan Masala of various brands belonging to other manufacturers, including for the destination(s) - Ranchi and Tata Nagar. Thus, the whole demand is presumptive and fit to be set aside.
.......
54.25 Shri Uma Shankar Awasthi, Manager of M/s Bihar Carrying Co., Kanpur in his cross examination conducted on 5.1.2017 has retracted from his earlier statement, stating that the same was recorded under undue influence and coercion and the same are involuntary and hence, not reliable. On being questioned, in his earlier statement dated 10.05.2008, he had given numbers and names of Vikram Tempo Drivers, who had brought Sir Brand Gutka/Pan Masala to his transport company. In 94 reply, he stated that these nos. and names were dictated to him by the investigating officers. He also categorically stated that on a given day, several tempos/vehicles etc. come to their transport company and it is not possible to remember the name of drivers or their vehicle nos. On being further questioned whether various gutka factories used to book their goods through M/s.BCC, he replied in negative and stated that the goods were always booked by the buyers/dealers themselves, who used to bring their goods to the transport company on different kinds of conveyance like rickshaws, trolly/ thelas, etc. 49 Excise Appeal Nos.167-169 of 2012 54.26 Thus, from the aforementioned facts and circumstances emerging in the cross examination of the various key persons, whose statements have been relied upon, we are satisfied that in view of the facts emerging in the cross examination, the statements recorded during investigation are not reliable, being involuntary. It is, thus, established beyond any doubt that none of the oral statements obtained during investigation and relied upon documents (third party) can be given any credence or evidentiary value as the same have been found to be involuntary or tutored statements tendered under undue influence/duress/coercion exerted by the investigating officers. We also find that save and except the statements, there is absence of any substantial evidence to corroborate the third party evidences. Such oral evidences are not sufficient for confirmation of the charge of clandestine removal in absence of any corroboration, by way of some documentary evidence of the appellant -
manufacturers."
4.7 This order of the tribunal has been upheld by the Hon'ble High Court of Allahabad as reported at [2023 (2) CENTAX 216 (ALL)]. Hon'ble High Court observed as follows:
8. Sri Naveen Sinha learned Senior Advocate assisted by Sri Nishant Mishra learned Advocate appearing for the assessee argued that the CESTAT after consideration of entire material on record reached at the conclusion that the duties and penalties have been mainly imposed on the basis of third party records (mainly transporters' record) and the statements of various persons who were staff of the transporters, authorized persons of three manufacturers, dealer/purchaser, railway booking agents and his associates and some of buyers/re-sellers of the goods manufactured by three manufactures/appellants therein.50 Excise Appeal Nos.167-169 of 2012
It was argued that a categorical stand of the appellants manufacturers before the CESTAT was that they have been selling their goods throughout ex-factory at ex-factory price. It is the buyer who after taking delivery, arranges for the transportation themselves. It was held that in view of the material on record, three manufacturers/appellants therein were neither the consignor nor the consignee in any of the third party transporters' records including the railways. Almost all the persons whose statements have been relied upon have either retracted their previous statements which were recorded during investigation and/or the veracity of their statements did not stand the test of cross-examination during the adjudication proceedings. The finding in this regard returned by the CESTAT had been placed before us to assert that the CESTAT had found serious anomaly in the allegations of clandestine removal through railways. A big part of copies of records supplied by railways was held to be unreliable by the Adjudicating Authority and the demand with respect to the alleged transport through railways has been confirmed by the Adjudicating Authority on the basis of retracted statements or the statements which did not stand the test in cross-examination. The Tribunal has, thus, held that such statements at best can be said to be hearsay evidence. The Tribunal (CESTAT) has, thus, concluded in paragraph 54.26 as under:-
"54.26 Thus, from the aforementioned facts and circumstances emerging in the cross examination of the various key persons, whose statements have been relied upon, we are satisfied that in view of the facts emerging in the cross examination, the statements recorded during investigation are not reliable, being involuntary. It is, thus, established beyond any doubt that none of the oral statements obtained during investigation and relied upon documents (third party) can be given any credence or evidentiary value as the same have been found to be 51 Excise Appeal Nos.167-169 of 2012 involuntary or tutored statements tendered under undue influence/duress/coercion exerted by the Investigating officers. We also find that save and except the statements, there is absence of any substantial evidence to corroborate the third party evidences. Such oral evidences are not sufficient for confirmation of the charge of clandestine removal in absence of any corroboration, by way of some documentary evidence of the appellant-manufactures."
The demand on account of goods seized from the premises of the transporters and traders was, thus, set aside. It was recorded that the demands of duty and penalty against all three manufacturers of 'Sir' Brand Gutkha and Pan Masala were also liable to be set aside as there was no proof of the allegations of clandestine clearance through railways and road transport. The allegations were based mainly on the statements of various persons and third party records, which did not stand the test of cross-examination.
9. It is argued that searches were conducted in the premises of three manufactures on two days, i.e. on 1-12-2007 and 9- 5-2008. The account books and all material documents were confiscated during the search but in the notices issued to the manufactures, there was no allegation of suppression of any material fact and any discrepancy in the books of account. The noticees were only required to explain about the seizure of raw material and finished goods from the manufacturers premises. The demand was for the period from September, 2004 till May, 2008 and only on the basis of certain stock of raw material and finished goods found inside the factory premises on the date of search, inference was drawn of clandestine removal of goods to evade excise duty. It is argued that the question is of appreciation of evidence and no presumption can be drawn with regard to evasion of excise duty merely for the fact that some unaccounted raw material and finished goods was lying in the factory premises at the time of search.
52 Excise Appeal Nos.167-169 of 2012It is vehemently argued that the counsel for the Revenue has wrongly submitted that Sri Rajesh Agarwal, the Authorized Signatory of three manufacturers, did not retract from his statement during his cross-examination before the Adjudicating Authority. Paragraph 52.17 of the findings returned by the CESTAT based on the cross-examination of Sri Rajesh Agarwal, the Authorized Signatory of three manufacturers recorded on 7-2-2017 before the Adjudicating Authority, has been placed before us, which is to be noted as under:-
"52.17 Shri Rajesh Agarwal, Authorised Signatory of the three appellant manufacturers in his cross examination on 7- 2-2017 stated that the three appellant manufacturers were selling their finished goods at ex factory gate at ex factory price. The manufacturers of Sir Brand Gutka were not undertaking or arranging any transport of the finished goods. He also asserted that in spite of repeated visits of thee Investigating officers, no incriminating documents or unexplained cash was found. He further stated that his earlier statement recorded during investigation were involuntary as the same was recorded under pressure and as per dictates of the officers. He refuted the charge that the appellant- manufacturers were removing their finished goods clandestinely and for such clandestine removal, transport was being arranged through Mr. Alok Krishna Gupta, who was also handling the sale proceeds of such sales. He categorically stated that they were receiving the sales price through cheque/DD/cash. He categorically denied that the three appellant - manufacturers were booking their clearance either through Railways or road transport agencies. As regards live consignment seized in the premises of the Railway/transporters, he clarified that there was an independent dealer's network, who were purchasing the goods ex factory gate, including M/s B.G. Projects. It was always the responsibility of the buyer to arrange for the 53 Excise Appeal Nos.167-169 of 2012 transportation. As regards the clause 'read and agreed' appearing in his subsequent written statement during investigation, he explained that he never had the opportunity to read his earlier statement, whenever his subsequent statement was recorded. He explained the condition under which the statement was recorded, as 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."
10. Reliance is placed on the decision of the Punjab and Haryana High Court in Jindal Drugs (P.) Ltd. v. Union of India 2016 SCC Online P & H 4780/2016 (340) E.L.T. 67 to argue that Section 9D of the Central Excise Act which provides the manner in which the statement of a witness is admitted in evidence, equally applies in adjudication proceedings by virtue of sub-section (2) of Section 9D.
11. It is, thus, argued that in absence of the circumstances contemplated by clause (a) or (b) of Section 9D(1), the statements recorded before a Central Excise Officer during the course of investigation under section 14 of the Central Excise Act, cannot be admitted in evidence. It is argued that clause (b) of sub-section (1) of Section 9D prescribes specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the Adjudicating Authority, viz, (i) the person who made the statement has to be first examined as a witness in the case before the Adjudicating Authority, and (ii) the Adjudicating Authority has, thereafter, to form the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.
12. The observation made by the Punjab and Haryana High Court behind the rationale of the precautions contained in 54 Excise Appeal Nos.167-169 of 2012 clause (b) of Section 9D(1) has been placed before us in paragraph 19 of the decision as under:-
"19. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the gazetted Central Excise officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned."
13. The submission, thus, is that the statement of a person recorded during the course of investigation before it is admitted in evidence has to be tested on the touchstone of scrutiny in accordance with the provisions of Section 9D(1)(b) of the Central Excise Act.
It is, then argued that the clandestine removal is a serious charge against a manufacturer, burden of proof for which is required to be discharged by the revenue by production of sufficient and tangible evidence. Unless there is clinching evidence making out the circumstance of clandestine removal, demands cannot be confirmed solely on the basis of presumptions and assumptions. The decision of the Division Bench of this Court in Continental Cement Co. v. Union of India [2014] 49 taxmann.com 374/[2016] 38 GSTR 206/47 GST 725/2014 (309) E.L.T. 411 (All.) has been placed before us to submit that to prove clandestine removal by clinching evidence, the revenue was required to bring some more material, in the shape of cogent evidence, beyond the 55 Excise Appeal Nos.167-169 of 2012 statements of the Authorized Signatory, clerk of the manufactures and third parties, transporters, dealers etc.
14. It is argued that the statements relied by the Adjudicating Authority in imposing demands by arriving at the finding of clandestine removal, are of those persons who have retracted from their previous statements, recorded during the course of investigation, with the categorical stand in writing and oral during the cross- examination that they were subjected to threat and coercion and their statements were recorded under duress. Apart from the retracted statements there was no material, the CESTAT, therefore, cannot be said to have committed any error of law in setting aside the order passed by the Adjudicating Authority.
Relevant paragraphs '12', '13' and '14' of the decision in Continental Cement Co. (supra) relied by the learned Senior Advocate appearing for the assessee are to be extracted hereunder:-
"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects:
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.56 Excise Appeal Nos.167-169 of 2012
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department.
14. In the instant case, no investigation was made by the Department, even the consumption of electricity was not examined by the Department who adopted the short cut method by raising the demand and levied the penalties. The statement of so called buyers, namely M/s Singhal Cement Agency, M/s Praveen Cement Agency; and M/s Taj Traders are based on memory alone and their statements were not supported by any documentary evidence/proof. The mischievous role of Shri Anil Kumar erstwhile Director with the assistance of Accountant Sri Vasts cannot be ruled out."
15. Sri Parv Agarwal learned Advocate for the Revenue, in rejoinder, further relied on the decision of the Apex Court in CCE v. Kalvert Foods India Pvt. Ltd. 2011 (270) E.L.T. 643; Lawn Textile Mills Pvt. Ltd. v. CESTAT 2018 (362) E.L.T. 559 (Mad.); N.R. Sponge Pvt. Ltd. v. CCE 2020 (372) E.L.T. 321 (Chhattisgarh) and Principal Commr. of CGST & Central Excise v. G.P. Ispat (P.) Ltd. 2019 (368) E.L.T. 76 (Chhattisgarh) to substantiate his submissions on the plea of clandestine removal in order to evade the excise duty on the part of three manufacturers.
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 57 Excise Appeal Nos.167-169 of 2012 consideration in this appeal so as to admit it for examination within the scope of sub-section (3) and (4) of Section 35-G.
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.
58 Excise Appeal Nos.167-169 of 201219. Clandestine removal is a serious charge as held by the Division Bench in Continental Cement Co. (supra). 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 59 Excise Appeal Nos.167-169 of 2012 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 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 Demand in the case of M/s Trimurti Products Limited was dropped by the adjudicating authority vide his order in original No 22/CE/Commr/2011 dated 22.09.2011. Interestingly this order dropping the demand in case of M/s Trimurti Products Ltd., and the impugned order confirming the demands against the appellants have been passed by the same person within a span of nearly one month, taking contrary views. Revenue had challenged this order by way of Appeal No E/147/2012-EX[DB] stating specifically as follows:
"8. While adjudicating a similar case against M/s Kaya Fragrances & M/s H-Choice Collection Pvt, Ltd., Kanpur, which was based on the same „private diary‟ and „loading registers‟ and statements tendered by employees of same transport company (i.e. M/s Bihar Carrying Co., Kanpur) and other identical evidences, the 60 Excise Appeal Nos.167-169 of 2012 same Adjudicating Authority has relied on such evidences and has confirmed the demand on the consignments of „Tiranga‟ brand of gutkha, vide earlier OIO No 19&20/2011 dated 18.09.2011. Thus non reliance on same/ identical evidences in instant case is not legal and proper."
4.9 Dismissing the appeal filed by the revenue tribunal vide Final Order No 70881/2018 dated 02.04.2018 held as follows:
"5. Heard the learned counsel for the respondent. The learned counsel for the respondent has taken us through page 80 of impugned Order-in-Original wherein the Original Authority discussed the statement dated 19.02.2010 recorded of Shri Shailendra Mittal, Proprietor of respondent company wherein Shri Mittal has stated that he sold the goods at the factory gate on cash payment and that there was no evidence to prove that the goods were transported by them and that it was neither their duty nor obligation to chase the goods upto the level of transport of goods or consumption of goods. The Original Authority also recorded that Shri Shailendra Mittal has stated that, their firm manufactured of Shikhar Brand Gutkha and that he gave number of machines installed during the period. The learned Original Authority has found that there was one person by name Shri Neeraj who was responsible for booking Gutkha with the transporter and Original Authority has held that Revenue could not establish that Shri. Neeraj was an employee of the respondent. The Original Authority has further observed that it was difficult to ascertain the quantum of duty paid or not duty nature of goods particularly because the show cause notice was issued by placing reliance on the statement dated 10.05.2008 of Shri Uma Shanker Awasthi and statement of Shri R.P. Singh recorded on 20.11.2008 wherein they had stated that duty paid goods were booked on GRs and non duty paid goods were booked on JST slips. The Original Authority has further observed that name of Shikhar Brand Gutkha has not been shown in the 61 Excise Appeal Nos.167-169 of 2012 private records such as „private diary pad‟, „JST Slips‟ and „Loading Register‟ maintained by the transporter. The learned counsel for the respondent has also taken us through RUD-17, which is statement dated 19.02.2010 of Shri Shailendra Mittal wherein he had stated that they were manufacturing Shikhar Brand Gutkha as franchisee. When he was asked to name the person from their firm responsible for dispatch of Shikhar Brand Gutkha , he replied that he himself used to dispatch Shikhar Brand Gutkha and further stated that they did not have any delivery van for transportation. He further stated that the goods manufactured by them were sold at factory gate and their customers made arrangements for transportation of the same. In respect of Charts marked as 2 G and J and statements of Shri Uma Shanker Awasthi, he replied that he was not able to offer commands on the quantity of Shikhar Gutkha shown in the said charts prepared on the basis of private records of transporter and also enable to explain about duty paid nature of such goods. Learned counsel for the respondent also has taken us through finding of Original Authority recorded on page 100 where the learned Original Authority has held that demands raised on the basis of Charts 2 G and J are not found to be sustainable on account of 13 reasons stated therein. The learned counsel for the respondent has submitted that the findings of Original Authority are detailed and reasoned and hence sustainable. The grounds of appeal raised by Revenue are more or less reproduction of show cause notice and there has been an allegation that the Original Authority did not appreciate the contentions of show cause notice. The learned counsel for the respondent has submitted that on the contrary the findings of Original Authority are reasoned and more detailed and, therefore, the grounds of appeal are not sustainable.
6. Having considered the rival contentions and on perusal of record we find that as submitted by the learned counsel for the respondent, the findings by the Original Authority are reasoned and on the basis of examination of evidences 62 Excise Appeal Nos.167-169 of 2012 produced before him on the basis which the show cause notice was issued and we do not find any ground raised by Revenue satisfactorily contends non-sustainability of findings by the Original Authority. We, therefore, do not find any merit in the grounds of appeal. In result we dismiss the appeal filed by Revenue."
4.10 In view of the discussions as above we do not find any merits in the impugned order against the three appellants before us, we set aside the same to that extent.
5.1 Appeals are allowed.
(Pronounced in open court on-15 July, 2024) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp