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1.

M/s KPL Rs.19.37 crores & interest Rs.19.37 crore

2. M/s EKTA NIL Rs.1 crore

3. Shri Deepak Kothari NIL Rs.1 crore

4. Shri Mithesh Kothari NIL Rs.1 crore

5. Shri D.R.Arora NIL Rs.1 crore

2. The said impugned order stands passed by the Commissioner in terms of earlier order of the Tribunal vide which the matter was remanded with the directions to re-adjudicate the matter.

3. As per the facts on record, M/s Kothari Products Ltd. [formerly known as M/s Kothari Products Ltd.(KPL)] are engaged in the manufacture of Sada Pan Masala, Gutka and Mawa. The appellants have four factories at different places but the present appeal relates to their Kanpur factory. Supari and Kattha are main raw materials for the manufacture of the appellants final product. After purchase of the said raw materials, Supari was being sent by the appellants to M/s Ekta Flavours Ltd., Unit-I for cutting on job work basis and Kattha was being sent to M/s Ekta Flavours Ltd., Unit-II for crushing/grinding. It may be mentioned here that the said two units of M/s Ekta Flavours Ltd. are subsidiary of the main manufacturer of M/s Kothari Products Ltd. in as much as the Managing Director and Director of the three units were common. The said units were also situated adjacent to the factory of M/s Kothari Products Ltd. The raw materials after being purchased from various suppliers were being offloaded directly at the units of M/s Ekta Flavours Ltd., Unit-I and M/s Ekta Flavours Ltd., Unit-II and after cutting the Supari and grinding the Kattha, the same were being sent by the said job worker to the factory of M/s Kothari Products Ltd.

Similarly by referring to some instances relied upon by the Commissions as regards transfer of Supari to their Baroda unit, Shri Anand submits that the Commissioner has not accepted their stand of transfer of Supari to their Baroda Unit on the ground that two out of five vehicles were tankers. He submits that the said transportation was through one New Skyking Roadlines, Kanpur. Statement of Shri Dharmendra Singh was to the effect that the said GRs although issued in his firms name were not issued by him or his staff. During the course of cross examination on 17.10.02, he categorically stated that the transactions of five consignments were entered in his books of accounts. This Supari was also accounted for by their Baroda unit on 12.08.2000 and was used in manufacture of finished goods, cleared on payment of duty. The mistake in the vehicles nos. might have occurred on account of possibility of mistake in mentioning the correct vehicle number. He submits that as long as their Baroda Unit had received and accounted for the said Supari in their account and payments were made to Shri Dharmendra Singh vide account payee cheque, no adverse inference can be drawn that such Supari was not transferred to Baroda unit and the same was used in the manufacture of final product at the appellants unit at Kanpur.

It further stands contested that though the Revenue has alleged that M/s Ekta I & II were grinding and crushing Supari and Kattha on the higher quantity, there is no allegation or evidence of payment of excess job charges to them. He submits that M/s KPL as also M/s Ekta I&II were duly showing job charges paid and received respectively for the entire financial year in their Balance Sheet and the Revenue has not disputed the said accountal as reflected in the Balance Sheets. There is no evidence of extra flow of cash from M/s KPL to M/s Ekta. Further department has not made any efforts to find out as to whether M/s Ekta I&II were able to crush and grind more Supari and Kattha than the quantity reflected in their records. No evidence in the shape of consumption of excess electricity, water, labour etc. to undertake job work stands produced by the Revenue. In the absence of such evidences, the Revenues stand that M/s Ekta I&II crushed excess Supari and Kattha and supplied the same to the appellants which was used in the manufacture of their final product cannot be sustained.

48. We find that there is no one to one co-relation of the delivery challans with the procurement of supari and Kattha by M/s Ekta I & II and for delivery of the same to manufacturer M/s KPL. Admittedly in a running business, raw material keeps on arriving on various dates and there is no legal binding that raw material should be consumed either as soon as the same is received in the factory or the said raw material should be consumed on first receive basis or more raw material cannot be procured before exhausting the earlier received raw material. We have also seen that in many cases these delivery challans showing the number of bags and the weight of the material was cut by pencil even to show the higher quantum of the same. Even otherwise we note that the genuineness of these documents does not stand established and in view of our observations that the same are fabricated, the evidentiary value of the said delivery challan cannot be accepted on the wider ground without Revenue establishing the authenticity of the same by co-relating with the receipt of so much unaccounted raw materials. We find that there is no evidence on record to show that for M/s Ekta I & II have been given more job charges for grinding/crushing raw material at their end. Similarly, procurement of Kattha/supari by M/s Ekta more than what is reflected in their records has not been established. Job charges tallied in the Balance Sheet of both the companies. It is also seen that in some cases, Kattha and Supari was supplied by M/s Ekta to their Baroda unit who have accounted the same in their records. As such we find that in absence of any clarity on the said delivery challans and their association with the actual delivery of Kattha and supari, the said delivery challans cannot be held to be corroborative evidence. According to the adjudicating authority such delivery challans issued by Ekta I & II reflect upon the delivery of unaccounted for grounded and crushed Kattha and supari. If that be so, for delivering such a huge quantity of Kattha and Supari, they have to first receive the same. There is absolute silence by the Revenue on this issue. How Ekta has received so much Kattha and Supari; from which source they have received; who were the suppliers of the said raw material; how payments were being made to the said suppliers; how the same were being transported; there is no answer to all these vital questions. Admittedly without first receiving the raw material, the same cannot be crushed/grinded and further supplied to M/s Kothari. There being virtually no evidence of procurement of Kattha/Supari, by M/s Ekta, we are of the view that so called delivery challans cannot be adopted as evidence for arriving at finding of clandestine removal.