Custom, Excise & Service Tax Tribunal
Maiden Pharmaceuticals Ltd. vs Rohtak on 29 August, 2018
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SCO 147-148, SECTOR 17-C, CHANDIGARH-160017
DIVISON BENCH
COURT NO.1
Appeal No. E/2810-2811/2011
[Arising out of the Order-in-Appeal No. 10/CE/COMMR/BKJ/RTK/2011
dated 30.08.2011 passed by the CCE (Appeals),Rohtak]
Date of Hearing/Decision: 29.08.2018
For Approval & signature:
Hon'ble Mr. Ashok Jindal, Member (Judicial)
Hon'ble Mr. Anil G. Shakkarwar, Member (Technical)
Maiden Pharmaceuticals Ltd
Naresh Goyal, Director Appellants
Vs.
CCE, Rohtak Respondent
_____________________________________________________ Appearance Shri. B.L. Narsimhan, Ms. Krati Somani Advocates- for the appellant Shri. G.M. Sharma AR. - for the respondent CORAM: Hon'ble Mr. Ashok Jindal, Member (Judicial) Hon'ble Mr. Anil G. Shakkarwar, Member (Technical) FINAL ORDER NO: 63191-63192 / 2018 Per Ashok Jindal:
The appellants are in appeal against the impugned order wherein cenvat credit sought to be denied of Rs. 4,08,08,426/-, consequently, the duty has been demanded along with interest and penalty on both the appellants have been imposed.2
E/2810-2811/2011
2. The facts of the case are that the appellant is manufacturer of intermediate bulk drugs and medicines located in HSIDC, Kundli, District- Sonepat, Haryana. The appellant was imported their inputs as well as the appellant is procured inputs indigenously. On the basis of information, the Anti-evasion department of Central Excise searched the premises of the appellants on 13.08.2009 and investigation was conducted and statements of the appellant's director was recorded. Further investigation continued and statement of Shri. Jayant K. Viz, Proprietor of M/s Shilex Chemicals supplier of input was also recorded, statement of 45 transporters was also recorded. On the basis of these statements, a show cause notice was issued to the appellants on 26.04.2010 alleging that the appellant has wrongly availed cenvat credit based on the invoices issued by the dealer without physical received of the inputs in their factory and proposed denial of cenvat credit Rs. 5,55,86,781/- during the period 2005-2006 and 2009- 2010 as per the detail below.
Sr. No. Annexure Amount Grounds of Appeal
1. A 11,78,601 Cenvat Credit pertaining to
PVC said to have not been
received in the factory as
the same could not be
used as raw material/
packing material of any of
any of the product
manufactured by the
appellant.
2. B 4,20,42,887 Cenvat Credit of raw
material purchased from
M/s Shilex Chemicals,
Delhi because only
invoices were issued by
M/s Shilex Chemcials and
no raw material was
supplied to appellant.
3. C 1,23,65,293 Cenvat Credit on the raw
material because some of
the vehicles mentioned on
purchase invoices were
different vehicle, not
registered vehicles and
vehicles as owned by one
M/s Dashmesh Transport
3
E/2810-2811/2011
Co. New Delhi.
Total 5,55,86781/-
3. The appellant contested the show cause notice and by way of impugned order, a demand of Rs. 4,08,08,426/- was confirmed and equivalent penalty was imposed on M/s Maiden Pharmaceuticals Ltd. and personal penalties were imposed on Shri. Naresh Goyal, Director of the appellant's Company and Shri. Jayant.K.Viz, proprietor of M/s Shilex Chemicals, the supplier dealer of Rs. 40 Lacs and 35 Lacs respectively. Against that order, the appellants are before us.
4. The Ld. Counsel for the appellant submits that the impugned orders has been passed in contravention of Section 9-D of the Central Excise Act, 1994. As the statements recorded during the course of investigation cannot been admitted as an evidence as per the procedure laid down in Section 9-D of Central Excise Act, 1944. To Support this contention, he relied on the decision of this Tribunal in the case Alliance Alloys Pvt. Ltd. Vs. CCE, Delhi-2016(338 )ELT (749) (Tri. Chd.) and CCE, Delhi Vs. Kuber Tobacco India Ltd. 2018-338-ELT-113 (Tri. Del.), therefore, he prayed that the statements recorded during the course of investigation cannot be relied upon, hence, the impugned order is liable to be set aside.
5. He further submitted that the appellant specifically made request for cross examination of the witnesses, whose statements have been relied upon in the show cause notice and on 20.01.2011, the appellant again made a request for cross examination at least 23 transporters but the said request has not been accepted by the Ld. Commissioner and allowed cross examination of some of the transporters. Although the witnesses appeared for cross examination but the appellant was not allowed to cross to examine the witnesses as per the questionnaire prepared by the 4 E/2810-2811/2011 appellant and the appellant was directed that he could only ask questions based on the statement on record. The appellant also sought to provide copy the backside of GR on which endorsement were made for sale of goods. However, as the same were not provided to the appellant and cross examination was further deferred. He also submits that the impugned order is not sustainable in the light of the decision of this Tribunal in the case of Bhupinder Steel Pvt. Ltd. Vs. CCE reported in 2018-VIL- 292-CESTAT-CHD-CE.
6. He further submits that the inputs received by the appellant were duly recorded in the books of accounts and in the absence of any corroborative evidence, cenvat credit cannot be denied. It is his submission that entire case of the Revenue basis of the statement of transporters and one supplier. He further submits that it is settled law and when the input has been duly accounted for in the books and when the inputs used in manufactured of final product. The final product manufactured out of such inputs has been cleared of payment of duty, the cenvat credit on inputs cannot be denied, merely, based on the statements of transporters that he has not transported the inputs. To support this contention, he relied on the decision of the Hon'ble High Court of Punjab and Haryana in the case of Neepaz Steels Ltd. reported in 2008 (230) ELT 218 (P&H), CCE Vs. Motabhai Iron Steel Industries reported in 2015 (316) ELT 374 (Guj.) and Bhupinder Steel Pvt. Ltd. (Supra).
7. He also submits that Shri. Jayant.K. Viz in his statement that he had sold PVC material in local market on the direction of appellant's Director. However, in his statement he has not mentioned the name and other details of such parties, therefore, the said statement is vague and in the absence of any corroborative evidence, the statement is not admissible. He further submits that the adjudicating authority on the basis of the 5 E/2810-2811/2011 statement of Shri. Naresh Goyal, Shri. M.K. Sharma and Shir. Jayant. K. Viz has held that PVC and EVA has not been received by the appellant. It is his submissions that the said finding is illegal and incorrect on the following grounds:
(a) Receipt of EVA has not been denied by these statements.
(b) Only the non-receipt of PVC has been admitted by the appellant which was only a result of fraud committed by a worker of the appellant.
(c) Shri. Naresh Goyal has stated that they do not use of PVC as he was not a technically sound man in manufacturing of the impugned product but he has confirmed used of other goods as per their letter dated 04.03.2010.
(d) The affidavit of Mr. M.K. Sharma evidencing the use of these goods has not been considered.
8. He further submits that the appellant has received input in transit sale and the goods were originally sold by the supplier to one purchaser and during transit, the goods were sold to the appellant. In such cases, the appellant produced Form-E1 as required under Central Sales Tax Act, 1956. However, in all the cases such forms were not available as the seller may not have issued these forms. But the purchase of these goods was duly recorded in the books of accounts. In the letter case, the original GR were received by M/s Shilex Chemicals (dealer). However, in these types of case form E1 and E2 is not involved as the dealer and the importers of these goods are in Delhi. It is his submissions that the ld. Adjudicating authority has dropped the demand of Rs. 45,06,251/- pertaining to Dashmesh Transport Co. and amount of Rs. 18,06,558/- pertaining to those transporters whose statement were not recorded. But for the remaining amount of 66,83,642/-, the ld. Adjudicating authority had examined the original GRs available with the appellant before passing the impugned order. It is his further submissions that the adjudicating 6 E/2810-2811/2011 authority has fell an error in confirming the demand of Rs. 1,25,65,293/- as vehicles were different vehicles other than the goods carrying vehicles. In other cases, vehicles were not registered with concerned RTO. It is his submissions that if the vehicle number has not been properly mentioned in the invoices then the appellant cannot be denied cenvat credit if the same has been duly accounted for in the books of account. It is his submissions that such a situation can arise in a case of mis-printing of vehicle number on the GRs. Furthermore, the vehicles of Dashmesh Transport Co. were duly registered with the RTO and found to be proper. Therefore, demand in respect of Dashmesh Transport Co. cannot be denied.
9. He further submits that the vehicles numbers have been investigated. During investigation, mistakes has been made for example vehicles no. MH04AL829 was involved in transportation whereas investigation was conducted with regard to vehicles no. MH04AC829, further, vehicles no. MH04BY1476 was taken as MH04U1476. Due to this mistake, it cannot be said that vehicles which are carrying goods were having different vehicles. He also submitted that demand for the period upto 26.04.2009 is barred by limitation. He also submits that the appellant has been regularly audited. In fact, DGCEI itself conducted through investigation on 17.02.2006 and nothing adverse was found in the books of the appellant. Consequently, no suppression or fraud can be alleged with respect to part of the demand. The same is also barred by limitation. For the same reasons, no penalty is also imposable on any of the appellants.
10. On the other hand, the ld. AR supported the impugned order and submits that it is facts on record that the supplier/dealer of inputs have denied for transportation of goods up to the premises of the appellant, therefore, the case has made out on the basis of the evidence and on the basis of GRs recovered from the transporters. The GRs recovered from the 7 E/2810-2811/2011 transporters reveals that the goods never transported up to the place of the appellant, therefore, demand against the appellant have been rightly confirmed. He also submits that Shri. Naresh Goyal himself has admitted non receipt of the goods, therefore, demand is rightly confirmed. He further submits that during the pendency of the appeal before this Tribunal, the appellant moved an application for additional evidence to be brought on record and those documents were different from the documents recovered during the course of investigation, therefore, the said documents has been obtained by the appellant fraudulently and these documents are not as per the originals. Therefore, he submits that as the appellant was involved in fraud by taking inadmissible cenvat credit on the basis of invoice issued by a supplier dealer without physically supplying the goods, therefore, in the light f the decision in the Hon'ble High Court of Punjab and Haryana in the case of Golden Tools International reported in 2006 (199) ELT 213 (P&H), demand is rightly confirmed.
He further submits that the extended period of limitation is rightly invoked. As the appellant were involved in fraud in the light of the decision of the Hon'ble Apex Court in the case of Commissioner of Customs Vs. Candid Enterprises reported in 2001 (130) ELT 404 (SC), therefore, he prayed that the impugned orders are to be upheld.
11. Heard the parties and considered the submission.
12. After considering the arguments advanced by both sides, we find that in the impugned order, the ld. Adjudicating authority has confirmed the following demands.
8
E/2810-2811/2011
Sr. NO. Description Duty Demand
1 Denial of cenvat credit on Rs. 11,78,601/-
non-receipt of PVC physically
in the factory of the
appellant
2. Cenvat credit availed during Rs. 2,72,64,532/-
the period 206-2007 to
2008-2009 (up to August
2009) solely based on the
statement of transporters.
This demand includes denial
of cenvat credit of Rs.
13,94,331/- on EVA not
used in the factory of the
appellant
3. Vehicle number mentioned Rs. 1,23,65,293/-
in the invoice issued by
Shilex Chemicals is
incapable of transporting the
said goods
Total 4,08,08,426/-
13. A demand of Rs. 11,78,601/- has been confirmed on account of denial of cenvat credit for non receipt of PVC physically in the factory of the appellant. The appellant has not contested the said amount and the same has been paid along with interest, therefore, the same has not subject before us. Accordingly, the said demand is confirmed along with interest.
14. Cenvat credit availed during the period 2006-2007 and 2008-2009 of Rs. 2,72,64,532/- has been denied on the basis of the statement of the transporters and on the ground that EVA were not used in the factory of the appellant. Further, cenvat credit of Rs. 1,23,65,293/- has been denied on the ground that the vehicles no. mentioned in the invoice issued by Shilex Chemicals is not capable for transporting the said goods. As both the issues are inter-linked, therefore, these issues are taken up by the Common findings.
15. We further take note of the fact that whole of the demand is based on the various statements of the transporters supplier, Shri. Naresh Goyal and one of the employees of the appellant. The statement of Shri. Naresh 9 E/2810-2811/2011 Goyal is not inculpatory. In fact, he has admitted non-receipt of PVC but he has not admitted that they have not receipt EVA in their factory premises and on account of non-receipt of PVC physically in their factory, the appellant has already conceded, therefore, on the basis of the statement of Shri. Naresh Goyal, the impugned order is not sustainable.
16. We further find that statements of various transporters and Shri. Jayant.K. Viz were never examined in chief, nor offered for cross examination, therefore, the statements on the basis on which cenvat credit sought to be denied are not admissible as held by this Tribunal in the case of Kuber Tobacco India Ltd. (Supra) wherein this Tribunal observed as under:
" 7. Reliance was also placed on the judgment of the Supreme Court in the case of Sanghi Textile Processors (P) Ltd. v Collector of Central Excise [1993 (65) E.L.T. 357 (S.C.)], wherein the question arose was „who is to bear the expenses involved in taking out photostats‟. The Supreme Court held that reasonable expenditure for copying whatever document the petitioner would ultimately find it reasonably necessary to take copies of, shall be reimbursed by the department to the petitioners and relied upon Para 9(a) of the Departmental Instructions.
8. Reference is also made to the Circular dated 27-7-2000 and most specifically paragraph 3 thereof, which reads as under :-
"3. The observance of Principles of Natural Justice by Departmental adjudicating authorities will result in avoidance of frequent remand of cases on the ground of non-observance of the same. The Departmental Adjudication manual contains detailed instructions/guidelines about the Principles of Natural Justice which much be followed in letter and spirit by each Departmental adjudicating authority".
Learned counsel relied upon a large number of judgments to which we shall advert to to the extent necessary.
9. Section 9-D of the Act would be relevant and it reads as under :-
"9-D. Relevancy of statements under certain
circumstances -
(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of providing, in any prosecution for an offence under this Act, the truth of the facts which it contains : 10
E/2810-2811/2011
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court."
10. We may mention here that as per the record, the adjudication proceedings have not yet commenced. It is in that context, that we shall first consider the issue raised on behalf of the appellants herein.
11. In International Electron Devices Ltd. v. Union of India [2010 (252) E.L.T. 352 (All.), a learned Division Bench of this Court was considering an issue of cross-examination of witnesses. The submission there was that the petitioner therein was entitled to cross-examine the witnesses, who participated in the weighment process during the search operation. The learned Bench declined to interfere at that stage by holding that if the Department fails to produce material witnesses, an adverse inference as permissible under law would be drawn against it and it is the choice of the Department to produce or not to produce the material witnesses. The learned Bench further observed that if the parties are not interested to produce a witness, the Court cannot compel them to do so.
Reliance was then placed on the judgement in Prestige Paints v. Commissioner of Customs and Central Excise, Kanpur, 2004 (173) E.L.T. 6 (All.). There also a show cause notice was issued and the petitioner had filed reply thereof. The matter was pending for adjudication under Section 33 of the Central Excise Act. The petitioner thereafter had prayed for cross-examining of the witnesses whose statements have been recorded and referred to the show cause notice. In that case, the learned Bench was pleased to hold that for the various reasons set out therein, even if in that case the Court held that the petition was premature, though it was open to challenge the denial of request for cross-examination.
12. In J & K Cigarettes Ltd. v. Collector of Central Excise [2009 (242) E.L.T. 189 (Del.)], the issue was a challenge to the constitutional validity of Section 9-D of the Central Excise Act. The learned Bench of the Delhi High Court was pleased to hold that only in some exceptional circumstances, the right to cross- examination could be taken away. There also, it appears that the cross-examination was sought at the stage of adjudication of proceedings. The challenge to the constitutional validity of the provision was upheld.
11
E/2810-2811/2011
13. We may also refer to some other judgments relied upon by the learned counsel for the respondent. In Kellogg India Pvt. Ltd. v. Union of India [2006 (193) E.L.T. 385 (Bom.) = 2007 (8) S.T.R. 84 (Bom.)] a Division Bench of the Bombay High Court was pleased to hold that the authority cannot refuse to produce documents only on the perception that the documents are not relevant. The matter was remanded back to enable the petitioner for cross-examining the witnesses. Non-production of witnesses for cross-examination it was held is violative of principles of natural justice and fair play and need no judgments. We may gainfully refer to the judgment in Arya Abhushan Bhandar v. Union of India [2002 (143) E.L.T. 25 (S.C.)]. In Sunder Ispat Limited v. Commissioner of Cus. & C. Ex., Hyderabad [2002 (141) E.L.T. 24 (A.P.)], a learned Division Bench of the Andhra Pradesh High Court held that the witnesses examined on behalf of the Department had to be produced for cross-examination in accordance with the principles of natural justice. We may also refer to the judgment of the Supreme Court in Lakshman Exports Limited v. Collector of Central Excise [2002 (143) E.L.T. 21 (S.C.)]. This also was in respect of proceedings in adjudication proceeding. That cross-examination at the stage of adjudication cannot be denied, is rectified in a large number of judgements. See : Gyan Chand Sant Lal Jain v. Union of India [2001 (136) E.L.T. 9 (Bom.)], Swadeshi Polytex Ltd. v. Collector of Central Excise, Meerut [2000 (122) E.L.T. 641 (S.C.)], Prayagdas Tushnial v. Collector of C. Ex. & Land Customs, Shillong [2000 (125) E.L.T. 377 (Gau.)], Lachmandas Tobacco Dealer v. Union of India and Ors. [1978 (2) E.L.T. J502 (Del.)] and Kalra Glue Factory v. Sales Tax Tribunal and Ors. [1987 (66) STC 292].
14. All these judgments in the matter of cross-examination are at the stage of adjudication. The law, therefore, at that stage, need not be elaborated, as it is the right of an assessee in the event the Revenue seeks to rely on the statements of witnesses recorded by it and whose statements are sought to be relied upon at the stage of adjudication to make available the said witnesses for cross-examination so that it could be established whether the statements recorded from the said witnesses have been voluntarily given and/or are relevant for the issue or based on personal knowledge or hearsay and the like. The object, being that a Tribunal or Court conducting a proceeding either before the Court or quasi judicial tribunal in adjudication, must have the true evidence and shift the evidence to weed out the chaff from the grain. Another reason being to satisfy itself that the person whose statement was recorded had made it voluntarily and based on his personal knowledge or legal records which can come out in cross-examination. This is to ensure the Court or Tribunal or the authority conducting the proceeding arrives at the correct conclusion based on tested evidence before it. The issue also is no longer res integra in view of the large number of judgements of the Supreme Court. "
and it was held that the adjudicating authority is required to first examine the witnesses in chief and also form an opinion that having regard of the circumstances of the case, the statements of witnesses are admissible in evidence, thereafter, witnesses are required to offer for cross 12 E/2810-2811/2011 examination. In the absence of examination in chief, and to allow cross examination, the whole adjudication exercise is futile. The same view was taken by this Tribunal in the case of Allianz Alloys Pvt. Ltd. (Supra). In view of the above, we hold that as neither the witnesses whose statements have been relied upon by the adjudicating authority were examined in chief, nor the cross examination has been allowed. In that circumstances, the demands on the basis of the statement of witnesses is not sustainable in terms of Section 9-D of the Central Excise Act, 1944.
17. We further take note of the fact that the appellants have used these inputs in manufacturing of their final product which have been cleared on payment of duty. These inputs has been procured and paid the payment through banking challans. In that circumstances, relying on the decision of Neepaz Steels Pvt. Ltd. (Supra), cenvat credit cannot be denied in the absence of any corroborative evidence. Moreover, we take note of the fact that the Revenue has failed to establish if the inputs in question has not been received by the appellant than from where the appellant has receipt the inputs to manufacture the goods which have been cleared on payment of duty. In that circumstances, in the absence of proper investigation, the cenvat credit cannot be denied to the appellant.
18. We further take note of the fact that cenvat credit also sought to be denied on the ground that vehicles no. mentioned in the invoices are not capable for transportation of goods up to the factory of the appellants, therefore, the appellants have not received the goods. We have gone through the records place before us, wherein, as per the GR issued by the transporter vehicles no. is mentioned as MH04AL829 but due to mistake vehicles no. mentioned in the invoices MH04AC829. Admittedly, c stands for car, L stands for lorry, this mistake is apparent on the invoices but on this ground cenvat credit cannot be denied to the appellant. We further take note of the fact that vehicles no. MH04BU1476 was mentioned in the 13 E/2810-2811/2011 GR wherein investigation was conducted with regard to the vehicles no. MH04U1476, as Revenue has failed to investigate about the vehicle no. MH04BU1476 and investigated with regard to MH04U1476, therefore, the said report is not admissible as evidence in favour of the Revenue. Further, we find that as per show cause notice vehicle no. mentioned is DL1LA0681 whereas the actual vehicle involved is DL1LB0681 which shows that the investigation conducted by the Revenue is deficient and wrong vehicle no. sought to be verified. Further, we find that the vehicles no. mentioned in the show cause notice as DL1LA6487 but actual vehicles no is DL1LP6481, therefore, these are the mistake apparent on record, during investigation, therefore, on the basis of vehicles no. without proper investigation, cenvat credit cannot be denied to the appellant.
19. We further take note of the fact that during the course of arguments, the appellant filed additional evidences in form of the GRs involved in transportation of goods wherein endorsement in favour of the appellants have been done by the supplier of goods and GR have been recovered from the transporters while seizing the GRs from the transporters, Revenue took Photo copy of the GRs without ascertaining the fact that on the back of GRs whether there is any endorsement has been done. But the GRs produced by the appellant are having endorsement in favour of the appellant, in the absence of original GRs, the photocopy of GRs is not admissible evidence in the light of the decision of the Hon'ble High Court of Punjab and Haryana in the case of Jawahar Lal Vs. Surinder Singh and others reported in 201 (174) PLR (147) wherein the Hon'ble High Court observed as under:
"9. Photostat copy of a document is generally sought to be admitted as secondary evidence by virtue of Section 63 (2) of the Act which provides that copies of original made from mechanical process ensuring in itself the accuracy of such copies are admissible as secondary evidence. While the photostat copies can be used for court purposes as evidential documentation but it is desirable that original be examined in all possible cases but when original is not 14 E/2810-2811/2011 available for reasons beyond one's control, photostat copy of a document may be examined to reach definite conclusions. However, before that the party seeking to produce the same must show that any of the circumstances mentioned in Section 65 of the Act exists warranting leading of secondary evidence. The controversy is generally with regard to cases falling under clauses (a) or (c) of Section 65 of the Act wherein the original is alleged to be lost or in the possession of opposite party.
10 The Hon‟ble Supreme Court in Ashok Dulichand v. Madhavlal Dube 1975(4) SCC 664, while dealing with a case under clause (a) of Section 65 of the Act, upheld the decision of the High Court wherein it recorded a finding that the photostat copy did not appear to be above suspicion and could not be admitted. In arriving at this finding, the High Court considered the facts that there was no other material on the record (except the affidavit of appellant himself) to indicate that the original document was in the possession of respondent No. 1, the appellant failed to explain as to what were the circumstances under which the photostat copy was prepared and who was in possession of the original document at the time its photograph was taken; respondent No. 1 in his affidavit denied being in possession of or having anything to do with such document. Thus, it was held that no foundation had been laid by the appellant for leading secondary evidence in the shape of the photostat copy.
11. In Smt. J. Yashoda v. Smt. K. Shobha Rani 2007 (2) RCR (Civil) 840, the Hon'ble Supreme Court while dealing with issue of admissibility of photocopy of a document, original whereof was in possession of third party, came to a conclusion that since, the conditions mentioned in Section 65 of the Act were not fulfilled, photostat copy could not be allowed to be produced as secondary evidence. The court relied on Ashok Duli Chand's case (supra) and observed as under:
"The rule which is the most universal, namely that the best evidence the nature of the case will admit shall be produced, decides this objection that rule only means that, so long as the higher or superior evidence is within your possession or may be reached by you, you shall give no inferior proof in relation to it. Section 65 deals with the proof of the contents of the documents tendered in evidence. In order to enable a party to produce secondary evidence it is necessary for the party to prove existence and execution of the original document. Under Section 64, documents are to be provided by primary evidence. Section 65, however permits secondary evidence to be given of the existence, condition or contents of documents under the circumstances mentioned. The conditions laid down in the said Section must be fulfilled before secondary evidence can be admitted. Secondary evidence of the contents of a document cannot be admitted without non-production of the original being first accounted for in such a manner as to bring it within one or other of the cases provided for in the Section."
15. While dealing with a case falling under clause (c) of Section 65 of the Act, the Hon‟ble Supreme Court in Benga Behra v. Braja Kishore Nanda 2007 (3) RCR (Civil) 240, wherein the Will was sought to be proved by way of secondary evidence, observed that it was obligatory on the part of first respondent to establish the loss of original will beyond all reasonable doubt. Since his testimony in this regard remained uncorroborated, therefore, photocopy could not be admitted as secondary evidence. This Court in Mukesh Kumar alias 15 E/2810-2811/2011 Motta v. State of Haryana 2011 (1) RCR (Civil) 675 while relying on Division Bench judgment of Patna High Court in Chaudhuri Janardan Parida and Ors. v. Prandhan Das, AIR 1940 Patna 245 (DB) observed as under:
"Therefore, it may be noticed that to permit secondary evidence of such a document which has been destroyed by a person in whose possession it was and in whose favour it created an enforceable legal right or an obligation is normally not to be allowed as secondary evidence. The secondary evidence of such a document may be tampered with or changed and it would be against public policy to take a chance of running the risk of fraud being committed. Besides, the destruction of the instrument may make a party liable for a contract which had either not been agreed to or had been rescinded with the destruction of document. Therefore, secondary evidence in such circumstances where document itself has been destroyed by the person in whom it created an enforceable legal right or an obligation is normally not be allowed."
These observations were made in a case where the person seeking to produce the photostat copy could not explain that from where he got the photostat. A doubt was, thus, created on authenticity of the photostat copy. It was therefore observed: "Photostat copies of documents can be prepared by manipulation and presented as original. Therefore, it would normally be unsafe on the mere asking to allow production of photostat copies as secondary evidence. These are admittedly not certified copies of the original and it is not clear as to whether these are copies of the original"
Thus it may be said that before being admitted as secondary evidence being copies prepared by mechanical process, the authenticity of the Photostat document has to be established where photostat copy of a document is produced and there is no proof of its accuracy or of its having been compared with or its being true reproduction of the original, it cannot be considered as secondary evidence. In other words, photostat copy of a document is not admissible as secondary evidence unless proved to be genuine or is admitted by opposite party. Clause (2) of section 63 has two requirements first - the copies should be prepared from a mechanical process and second - the process should be such which in itself ensures accuracy of copy. While every Photostat copy is prepared by mechanical process however, it may or may not be accurate, therefore its admissibility as secondary evidence in view of clause (2) of Section 63 of the Act is subject to proof of the fact that it was a correct copy of original document. Similar observations have been made by this Court in Prem Lata v. Dwarka Prasad and Ors. CR No. 4913 decided on 23.08.2013 and Rajasthan Golden Transport Company v. LRs of Amrit Lal, 1998 (3) RCR (Civil) 95. Therefore, even when the permission to produce photostat copy of a document as secondary evidence is granted, it is open for the parties to argue about the probative value attached to it. When it is shown that photostat copy by itself is a suspicious document, it cannot be relied upon. Following observations of the Hon‟ble Madhya Pradesh High Court in Kanchan Malhotra v. Yashvir Singh 1986(1) HLR 387 are relevant in this regard:
"Now, it may be stated that the photostat copy could not just be readily accepted as a reliable piece of secondary evidence unless there was clinching proof that (i) this photostat copy truly represented some original or its counter-foil, (ii) this photostat copy 16 E/2810-2811/2011 was prepared by mechanical process by someone at some particular place on any particular date and at any particular time and (iii) the original or its counter-foil from which this photostat copy was prepared, was produced at the relevant time by any person in custody of such document."
and the Hon'ble High Court of Punjab and Haryana has laid down, the principle for admissible of evidence of photocopy of documents as under:
18. The principles culled out from the aforesaid discussion are summarized below:
a) Photostat copy of a document can be allowed to be produced only in absence of original document.
b) When a party seeks to produce Photostat copy it has to lay the foundational facts by proving that original document existed and is lost or is in possession of opposite party who failed to produce it.
Mere assertion of the party is not sufficient to prove these foundational facts.
c) The objections as to non existence of such circumstances or non existence of foundational facts must be taken at earliest by the opposite party after the photostat copy is tendered in evidence.
d) When the opposite party raises objection as to authenticity of the Photostat copy its authenticity has to be determined as every copy made from a mechanical process may not be accurate. Both the requirements of clause (2) of section 63 are to be satisfied.
e) Allowing production of Photostat copy in evidence does not amount to its proof. Its probative value has to be proved and assessed independently. It has to be shown that it was made from original at particular place and time.
f) In cases where the Photostat copy is itself suspicious it should not be relied upon. Unless the court is satisfied that the Photostat copy is genuine and accurate it should not be read in evidence.
g) The accuracy of photostat copy shall be established on oath to the satisfaction of court by the person who prepared such copy or who can speak of its accuracy."
therefore, we hold that photocopies of GRs relied upon by the Revenue are not admissible evidence. In that circumstances, the photocopies of GR cannot be relied upon and the copies of GRs produced by the appellant having endorsement on their favour is to be taken as the admissible evidence , as the Revenue has failed to prove contrary to that. In that circumstances, we hold that cenvat credit cannot be denied to the appellant.
17
E/2810-2811/2011 We also take note of the fact that on the basis of endorsement on the back of GRs, the adjudicating authority has dropped the demand also, therefore, the photocopy of GRs produced by the Revenue is not an admissible evidences.
20. In view of the above discussion, we hold that the impugned orders qua denial of cenvat credit of Rs. 2,72,64,532/- + Rs. 1,23,65,293/- is not sustainable, therefore, the following order is passed:
(A) Cenvat credit of Rs. 11,78,604 is denied, the same is recoverable of the appellant along with interest which appellant has already paid, therefore, we confirmed the said amount and imposed the penalty @ 25% of the duty confirmed in terms of Proviso to Section 11 AC of the Central Excise Act, 1944.
(B) Cenvat credit of Rs. 3,96,29,825/- is held to be admissible. (C) No penalty is imposable on Shri. Naresh Goyal Director of the appellant.
The appeals are disposed of in the above terms.
(Dictated and pronounced in the open court)
Anil G. Shakkarwar Ashok Jindal
Member (Technical) Member (Judicial)
rt