TMI Blog2010 (8) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 dated 28-10-05, passed by Commissioner of Central Excise, Delhi-I, by which the Commissioner, in addition to confirming duty demand of P.s. 33,20,03,239/- against M/s. Amar Jyoti Packers, 223, Village Budhpur, P.O. Alipur, Delhi (hereinafter referred to as AJP) under proviso to Section 11A(1) of the Central Excise Act, 1944 (hereinafter referred to as Excise Act), alongwith interest on this duty under Section 11AB ibid, and imposing penalty of equal amount on AJP under Section 11AC of the Excise Act, also imposed penalties of Rs. 21 crores, Rs. 25 crores and Rs. 21 crores on Shri Devi Dass Garg, Shri Rakesh Kumar Garg and Shri Santosh Kumar Garg respectively under Rules 25 26 of the Central Excise Rules, 2001/2002 on the ground that it is Shri D.D. Garg, Shri R.K. Garg and Shri S.K. Garg, (hereinafter collectively referred to as Gargs) who were the persons behind AJP. 2. The facts leading to these appeals are, in brief, as under: 2.1 AJP, a proprietary firm of one Shri Mahesh Kumar Gautam is a manufacturer of Pan Masala and Gutka of "Rajdarbar" brand which are charge able to Central Excise Duty under sub-heading 2106 20 00 of the Central Excise Tariff, as it stood during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be processing raw-material such as Supari, Illaichi, Tobacco, Kattha, Chuna, Menthol and Khushboo to make pan masala and gutka powder and the same was being sold in cash to AJP and NFPL. The goods were being sent to AJP and NFPL under challans wherein the description of the goods was being mentioned as "Supari and Kattha" instead of cut, mixed and ground Supari, Kattha, tobacco, chuna, Illaichi etc. A challan No. 1 dated 20-10-2000 was recovered from the premises of ST but against that challan, no invoice or bill had been raised, which showed that the raw material received by AJP from ST under this challan were not accounted for by AJP. Shri Dev Kumar Sharma, Accountant of ST, present at the time of search, in his statement dated 20-10-2000 stated that the headquarters of the ST is at D-1/2, Model Town-Ill, Delhi and that owners of this factory are Gargs, one of whom is Shri R.K. Garg and that cut, ground and mixed Supari, Tobacco, Chuna, Kattha, Menthol etc. packed in gunny bags is sold mainly to AJP and NFPL in cash. Shn Dev Kumar Sharma, in his further statement dated 19-3-04, confirming his earlier statement dated 20-10-2000, stated that whenever any goods were dispatched b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T and Krishna Packers were related to Garg family. 2.4 Summons dated 6-11-2000, 23-11-2000, 7-12-2000 and 8-4-2000 were served on Shri Sunil Kumar Aggarwal, Proprietor of ST and he finally appeared before the investigating officers on 22-4-02, when his statement was recorded under Section 14 of the Excise Act wherein he stated that the factory premises of ST is owned by Shri D.D. Garg, from whom it has been taken on 11 months lease w.e.f. 1-4-98; that he is not aware whether the said lease agreement was renewed or not; that he does not know in whose name the electricity connection of the factory or two landline telephones installed have been taken; that Shri Vinod Bansal, authorized signatory of AJP, has no connection with ST; that he is not aware as to why Shri Bansal has signed as authorized signatory of ST in a sales tax document presented to Sales Tax Department and that he cannot explain as to why the computer servicing report No. 2005 dated 23-4-01 in respect of computers of ST was signed by Shri Vinod Bansal with M/s. Internet Computers. Shri Sunil Kumar Aggarwal in his further statements dated 9-8-02, 14-7-03, 21-7- 03, 31-10-03 and 19-2-04 stated that while he has no con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 to 3,60,000 pouches of 2 gms. Each i.e. about 25-30 bags and it appeared that the rest of the production was being cleared clandestinely without payment of duty. On this basis, duty evasion by AJP during 1-4-2000 to 20-10- 2000 and 21-10-2000 to 31-8-2002 periods was estimated to be Rs. 5,51,94,181/- and Rs. 27,68,09,058/- respectively. AJP voluntary deposited an amount of Rs. 25 lakhs vide TR-6 Challans dated 22-11-2000 and 17-1-2000. On this basis, a SCN dated 14-5-04 was issued to AJP, Shri D.D. Garg, Shri R.K. Garg, Shri S.K. Garg, Shri M.K. Gautam and others for - (a) demand of Central Excise Duty amounting to Rs. 33,20,03,239/- from AJP in respect of clandestine clearances of Rajdarbar brand Gutka alleged to have been made during the period from 1-4-2000 to 31-8-2002, (b) alongwith interest on this duty under Section 11AB and appropriation of Rs. 25 lakhs already deposited towards this- demand; (c) imposition of penalty on APJ under Section 11AC of Excise Act; and imposition of penalty under Rule 209 209A of Central Excise Rules, 1944/Rule 25/26 of Central Excise Rules, 2001/2002 on ST, Shri D.D. Garg, Shri R.K. Garg, Shri S.K. Garg and Shri Vinod Bansal. 2.8 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real persons behind AJP; that Gargs were manufacturing Gutka only upto 1995-96 and since then, they have been only allowing the use of their brand names for royalty, that Gargs had no control on AJP; that it is Shri M.K. Gautam who was running AJP and was signing all the returns like monthly ER-1 return, income tax return; that in absence of any independent corroborative evidence, Shri M.K. Gautam's statements have no evidence value; that it is settled law that a retracted statement is of no evidence value unless corroborated by independent evidence; that when duty demand is against AJP, no penalty can be imposed on Gargs who had no connection with AJP; that as per Commissioner's finding in para 178 179 of the order-in-original, it is Shri Vinod Bansal who was the main person involved in the duty evasion; that no enquiry has been conducted with the buyers of gutka/pan masala; that the loans provided to AJP by some companies, some of which are owned by Gargs, have been paid by AJP; that there is no finding in the impugned order that Gargs physically dealt with the goods clandestinely cleared by AJP and therefore, no penalty can be imposed on them under Rule 209A of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only a Pujari employed by Gargs in their house and he knew nothing about manufacture and marketing of gutka and pan masala; that it is the Gargs who were manufacturing and selling gutka and pan masala by using the cover of AJP; that purchase of machinery of AJP from M/s. Krishna Packer had been financed by the firms/companies under the control of Gargs, that the statement of Shri Sunil Kumar Aggarwal, Prop. of ST also shows that it is the Gargs who were controlling this firm, as he was not even aware as to whether the lease deed in respect of the premises of ST with Shri D.D. Garg has expired or has been extended and in whose name the power con nection and telephone connections are installed, that para 35 of the impugned order-in-original describes in detail the mod us operandi adopted by ST for sending bags of gutka and pan masala powder to AJP without accounting in their ac counts, that para 36 and 38 of the order-in--original describe in detail as to how the black money generated by unaccounted sale of 'Rajdarbar' gutka and 'pan masala' by AJP was being converted into white income of Gargs by showing the sale of gold jewelry by them to M/s. Surya ornaments and M/s. Shreeji Jew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /25 of Central Excise Rules, 2001/2002 as well as under Rule 209A of Central Excise Rules, 1944/26 of Central Ex cise Rules, 2001/2002. 5. Coming to the first question as to whether the appellants i.e. Shri D.D. Garg, Shri R.K. Garg and Shri S.K. Garg are the actual persons behind AJP and its operations, we find that there is no dispute about the fact that the proprietor of AJP Shri M.K. Gautam, was working as a pujari in the house of Shri R.K. Garg on monthly wages of Rs. 2,000/- to Rs. 3,000/-. There is no dispute about the fact that Gutka/Pan Masala powder i.e. Supari, Tobacco, Chuna, Kattha, Illaichi, Perfumes etc., cut, ground and mixed, was being received from ST on credit and in the premises of AJP, only the packing into the pouches was being done. Similarly, there is no dispute about the fact that AJP were using Raj Darbar brand on Gutka/Pan Masala pouches, which was owned by the SIP, a parthership firm of Shri D.D. Garg and Shri S.K. Garg under an agreement and the purchase of plant and machinery by AJP from M/s Krishna Packers had also been financed by the companies in which Shri D.D. Garg and Shri R.K. Garg and Shri S.K. Garg were Directors. However, the main evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amily members of Garg family and its sale after getting the same converted into gold bars; (5) Statements dated 26-4-02, 4-11-03 and 12-3-04 of Shri Mahesh Kumar Gautam, wherein he has repeatedly stated that he was working only as pujari in the house of Shri R.K. Garg on monthly wages of Rs. 2,000/- to Rs. 3,000/-, that he knows nothing except for working as priest performing religious rites which is his family profession, and that he was signing the various papers of AJP only on the instructions of Shri R.K. Garg, Shri D.D. Garg and Shri S.K. Garg. 5.1 The appellant, however, plead that other than the statement of Shri M.K. Gautam, there is no other independent evidence showing that it is the appellant who were behind AJP and its operations and that even the statements of Shri M.K. Gautam are not reliable as the statement dated 26-4-2000 of Shri M.K. Gautam has been retracted by him on the very next day and an FIR was filed with the police against the Investigating Officers complaining of having been beaten up by them and in this regard he has also submitted a medical examination report from Lok Nayak Hospital. 5.2 The factory of AJP had been searched on 20-10-2000 and at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 26-4-02 was recorded under coercion or duress. Moreover, we also find that further statements of Shri Gautam was recorded on 4-11-03 and 12-3-04 and while during this period he had enough time to think over the pros and cons of sticking to his earlier statement dated 26-4-02, in both these statements re corded on 4-11-03 and 12-3-04 he confirmed his earlier statement dated 26-4-02 as true and correct and in these statements he also stated that the purchase of machinery installed in AJP had been made from M/s. Krishna Packers on credit and that M/s. Krishna Packers and M/s. Surya Traders were related to Garg family. In view of these circumstances, we hold that the statements dated 26-4-02, 4-11-03 and 12-3-04 of Shri M.K. Gautam have to be treated as true, correct and voluntary statements and hence admissible as evidence. 5.3 Though on paper M/s. Surya Traders (ST) were supplying the raw material - Supari, Tobacco, Illaichi, Chuna, Kattha, perfumes etc. to AJP for manufacture of Gutka/Pan Masala, as is clear from the statement of Shri Dev Kumar Sharma, Accountant of ST. these ingredients were not being supplied as such but were being supplied after grinding and mixing and, thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a departmental proceeding are distinct and different. Whereas in a criminal case, it is essential to prove a charge beyond all reasonable doubt, in a departmental proceeding, pre ponderance of probability would serve the purpose. (See Kainaladevi Agarwal v. State of W.B.) 13. It is now well settled by reason of a catena of decisions of this Court that if an employee has been acquitted of a criminal charge, the same by it self would not be a ground not to initiate a departmental proceeding against him or to drop the same in the event an order of acquittal is passed." 5.5.1 Hon'ble Supreme Court, in the case of Collector of Customs, Madras v. D. Bhoormull reported in 1983 (13) E.L.T. 1546 (S.C.), in which goods of foreign origin, alleged to have been illicitly imported into India, had been recovered from the premises of M/s. Shah Rupaji Rikhaldas, Chennai and ownership of the goods had been claimed by one Shri D. Bhoormull claiming the goods to have been legally imported, but who never appeared before the Investigating Officers with the necessary documents, while considering the question of liability of the seized goods for confiscation and of Shri D. Bhoormull for penalty unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "So far as trial proceedings are concerned, it is the axiomatic proposition of law that circumstantial evidence should point only to one hypothesis, namely, the guilt of the person and should be absolutely incompatible with the innocence of the person accused of an offence. But the effect of the said decisions of the Supreme Court is that the standard of proof in criminal prosecution before a criminal court is different from the standard of proof before the adjudicating authority, where preponderance of probability would be a guiding factor and proof beyond reasonable doubt, relevant in criminal prosecution before a criminal court, cannot be bodily lifted and transported in adjudication proceedings, when consideration of probabilities would be the guiding factor". 5.5.3 Thus the standard of proof required in the Departmental proceedings under the provisions of the Customs Act, 1962 or Central Excise Act, 1944 or of the Rules made thereunder, for confiscation of goods, confirmation of demand for duty evaded, and imposition of penalty is the preponderance of probability. For establishing to be preponderance of probability, the adjudicating authority or the Tribunal has to evalua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the same had been taken on 11 month's bear by ST w.e.f. 1-4-98. But Shri Sunil Kumar Aggrawal was not in a position to tell as to whether the base agreement has been extended or not and how much amount was being paid to Shri D.D. Garg as base rent. The Accountant Shri Dev Kumar Sharma, on the other hand in his statement dated 20-10-2000 stated that owners are the ST and Gargs having office at "D /2, Model Town-III, Delhi". The fact that the invoices for the goods meant for ST, dispatched by M/s. Sai Fragrances arid Flavours at address -Model Town-HI, Delhi", which is the address of Gargs, reached the ST's premises located at "31/22, Bees Killa Road, Jindpur, Delhi" also points to link between Gargs and ST and corroborates the statement of Shri Dev Kumar Sharma. (3) Though M/s. Surya Ornaments with Shri Sunil Kumar Aggrawal as Proprietor (who is also the proprietor of ST) claim to have purchased huge quantity of gold jewellery from members of Garg family during 1998-99, i.e. prior to the period with we are concerned in this case, the fact remains that it does not appeal to common sense that a person with no financial resources and no business experience would suddenly be come a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it is a material piece of evidence collected by customs officials under Section 108 of the Customs Act. That material evidence incriminates the petitioner inculpating in the contravention of the provisions of the Customs Act. The material can certainly be used to connect the petitioner in the contravention in as much as Mr. Dudani's statement clearly implicates not only himself but also the petitioner. It can, therefore, be used as substantive evidence connecting the petitioner with the contra vention by exporting foreign currency out of India." Section 108 of the Customs Act, 1962 and Section 14 of the Central Excise Act, 1944 being pan materia, the ratio of the above judgment is applicable to Central Excise case also and accordingly, the inculpatory statement of a co-accused can be used as a substantive evidence for proving charge against the person implicated is the statement. 5.7.1 The statements dated 26-4-02, 23-10-03 and 4-11-03 of Shri M.K. Gautam, recorded under Section 14 of the Central Excise Act, by a Gazetted office of Central excise, wherein he has stated that though he was the owner of AJP only on paper and Shri Vinod Kumar Bansal looked after the work ..... X X X X Extracts X X X X X X X X Extracts X X X X
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