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P.S. Bajaj

1. The above captioned appeals have been preferred against the common order-in-original dated 5.2.2001 vide which the Commissioner of Central Excise has confirmed the duty with penalty against the company, appellants No. 1, and imposed penalties on the other appellants as detained in the impugned order itself.

2. The appellants No. 1, M/s Globe Synthetics Ltd. (in short 'M/s GSL') is a company engaged in the manufacture of polyester yarn (texturised and drawn/twisted). They were served with a show cause notice dated 12.8.1997 alleging that they had manufactured polyester yarn during the period November 1994 to June 1995, weighing 497671.746 kgs from the POY, clandestinely received from the company, appellants No. 4 (in short 'M/s HPL') and removed the same clandestinely without entering in the statutory records, without issue of invoice and without discharging the duty liability. The penalty was also proposed to be imposed on appellants No. 2 & 3 being the Managing Director and Director (Incharge) respectively of the company, M/s GSL, who were responsible for the day-to-day affairs of the business of the company. Similarly, penalty on the company, appellant No, 4, was also proposed to be imposed for having been acquired/purchased the polyester yarn (Texturised & Drawn/Twisted) from the company, GSL during the abovesaid period with full knowledge that the same was not duty paid.

3. The appellants contested the correctness of the show cause notice. The company, GSL, denied the clandestine manufacture and removal of the polyester yarn during the period in dispute without the costs of invoice and without payment of duty. Similarly, the company, HPL, denied the receipt of the goods from the company, GSL, in a clandestine manner. The Commissioner, however, did not accept the version of the appellants and through the impugned order confirmed the duty alongwith penalty against the company, GSL and imposed penalties of various amounts on other appellants as detailed in the impugned order itself.

5. On the other hand, the learned SDR, has simply reiterated the correctness of the impugned order.

6. To substantiate the allegations, firstly, of clandestine receipt of POY from the company, HPL, by the company, GSL, during the disputed period and manufacture of texturised and drawn/twisted polyester yarn out of that and secondly, of the clearance that yarn clandestinely without issuing the invoices and paying the duty, to the company, HPL, the sole evidence relied upon by the revenue is the statement of Shri B.M. Gupta, who was then Vice-President of the company, HPL, and from whose factory one diary and some loose sheets were recovered. In the diary and loose sheets, Shri B.M. Gupta, is alleged to had made entries regarding the supply of POY to the company, GSL, during the disputed period in a clandestine manner. He also allegedly admitted this fact in his statement recorded on 6.7.1995. He is also alleged to had submitted chart showing the details of the entries made in the diary regarding the clearance of the goods (POY) to company, GSL and M/s Emmtex. But, in our view, his evidence carried no legal value and credence in the eyes of law and as such could not be made basis for confirmation of duty with penalty on appellant No. 1, company, GSL, and penalties on other appellants under Rule 209-A, for these reasons. Firstly; Shri B.M. Gupta, resiled from his confessional statement dated 6.7.1995 by alleging that the same was obtained under duress and coercion. He even in his affidavit filed by him with the Writ Petition filed in the Hon'ble Punjab & Haryana High Court, confirmed his retraction of the earlier confessional statement having been obtained under duress and coercion. But, thereafter he again changed his stand and stated that his earlier statement was voluntary. He had been, in fact, changing his stand regarding the maintenance of the alleged diary and the loose sheets, from time to time as and when he found convenient. Therefore, he could not be said to be a man of credence.

10. The learned Commissioner in the impugned order has also referred to the statements of other officials of the companies, GSL and HPL recorded during investigation and the bill/delivery challans and bill discounting documents allegedly issued by the company, GSL to the company, M/s HPL. But these documents did not categorically advance the case of the Revenue, for substantiating the allegations of clandestine receipt of raw material and manufacture of the goods by the company, GSL. Shri P.L Hazra, Financial Officer of the company, HPL, in his statement had only disclosed that the bill discounting documents found in File No. A-50 related to the purchase of the polyester yarn by the HPL from the company, GSL and SSL. To the same effect was the statement of Shri Ram Avtar Yadav, Chief Manager (Accounts) of HPL, regarding the bill discounting file, but there is nothing on the record to suggest that if these witnesses were subjected to cross-examination by the appellants. Even otherwise from the bill discounting document, no inference could be drawn that there had been clandestine removal of the goods by the company, GSL, to the company, HPL. No discrepancy in the statutory record of either of these two companies was found regarding the sale-purchase transactions of the goods. Shri Rajesh Chowdhary, Manager (Finance) of the HPL, nowhere in his statement admitted the clandestine removal of the goods by the company, HPL to the company, GSL He only deposed that most of the yarn was sold in Surat/Bombay markets. Regarding Bill of Exchange (Hundi), he submitted that he had been approaching various finance companies for short term loans. Shri Rajeev Agarwal, Joint Managing Director of the company, HPL, stated that he had been receiving all the reports coordinating the activities of the various sections of the company, but he nowhere admitted the clandestine removal of the goods by his company, HPL to the company, GSL, or clandestine receipt of the goods from GSL by the company HPL. Similarly, Shri Rakesh Gupta, Managing Director of GSL, in his statement nowhere admitted the clandestine receipt of raw-material from the company, HPL or clearance of the finished goods by his company, to the HPL. He did not dispute his signatures on the Hundi and Invoices, but he explained that these were submitted to the finance companies for taking loans. Shri Rajeev Agarwal and Shri Rakesh Gupta, appellants on behalf of the company, GSL, denied the clandestine sale of the goods to the company, HPL The discounting bills were only submitted to the finance companies, namely, M/s Apple Industries Ltd., M/s Ashok Leyland Finance Ltd., M/s Wipro Finance Ltd. and Anagram Finance Ltd., for the purpose of taking loans and officials of these companies, namely, Shri Vivek Verma, Shri Sanjay Gandhi, and G. Srinivasan and Shri Rajan Khosla respectively have only deposed about the loans advances on the basis of the bill discounting documents to the company, HPL. None of them had uttered any word about the actual receipt of the goods by the company, HPL, from the company, GSL or from any other supplier. No evidence regarding the actual sale of the goods by the company, GSL to the company, HPL, had been brought on record. The sole evidence of Shri B.M. Gupta for proving the alleged clandestine sale and purchase of the goods between the two companies, HPL and GSL, based on his private diary and the loose sheets, as observed above, carried no legal value being inadmissible in evidence. No excess or unaccounted goods were found lying in the factory premises of either of these two companies. No seizure of the goods was made from the factory premises of company, GSL. No incriminating document was also recovered showing clandestine sale/purchase of the raw material/finished goods between the two companies.