TMI Blog2004 (10) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... 999 and not all the persons whose statements have been relied upon by the Department. In view of these facts and circumstances, the Revenue cannot claim that the appellants have been given full opportunity to cross-examine the witnesses. Accordingly, the statements of these persons cannot be relied upon against the appellants. There was no evidence of any transporters and/or buyers of the appellants to show that they had received any non-duty finished goods from the appellants; there is no evidence to show there was any unaccounted cash at their premises/depot; no evidence that there was any excess stock of main raw materials for manufacture of their finished products. It is settled law that whenever the charge of clandestine removal is made, the Revenue has to prove that the assessee has procured all the raw materials required for the manufacture of final product. In the present matter Revenue has not adduced any evidence to show that the appellants had procured any raw materials in excess of the quantities mentioned in their records. This is evident from the show cause notice itself wherein it is mentioned in para 2 that the officers verified the stock of finished goods however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material in excess at the appellant's factory or office, nor did they find any incriminating document in their premises; that there was also no seizure of stock from any of their customers nor was mere any seizure of their finished products in transit. 2.2.He, further, mentioned that a show cause notice dated 8-9-1995 was issued to the appellants for demanding duty on the finished goods allegedly removed by them clandestinely for the period 1991-1994 and for imposition of penalty, that the allegation in the show cause notice was that Sharp Industries had cleared non-duty paid laminates to some entities known as Shyam Sunder Sons Pvt. Ltd., Delhi Zarda, Prakash Zarda and Ramlal Shyamlal which were allegedly delivered to the appellants and those laminates were used by them to manufacture and clear Gutkha and Pan Masala without payment of duty; that these charges were made on the basis of : (i) the recovery of documents from the premises of Sharp Industries and their transporters, and (ii) the statements of the employees of M/s. Sharp Industries Ltd., wherein it had been stated that the said entities were fictitious front entities of the appellants. 2.3.He mentioned that the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inghal, Appellant No. 2, in his statement dated 2-8-1994, had explained the position to the officers. In support of the contention, the learned Advocate showed a photocopy of the R.G.23A Part-I register which showed the removal of entire quantity of laminates on the date of receipt itself. The learned Advocate also mentioned that the Department had started the investigation on the basis of excess stock of laminates on the shop floor vis-a-vis the records after the visit of the officers on 4-6-1991; that the practice of issuing the entire quantity of laminates in the records was made known to the Department and a reconciliation of the laminates with production was filed; that pursuant thereto a show cause notice was issued alleging shortage instead of excess; that the order confirming the show cause was eventually set aside by the Appellate Tribunal vide Final Order No. A/2007/96-NB, dated 31-7-1996. 3.3.He also mentioned that the Department caused investigations from transporters and made enquiries to assess if the appellants had indulged in procuring Supari, one of the main ingredients of their finished product, in cash, that the Department has not found anything; that the Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision in the case of Arsh Castings Pvt. Ltd. v. CCE, Chandigarh - 1996 (81) E.L.T. 276 (T) wherein it has been held that "It is an elementary principle of natural justice and fair play that a person who is sought to be proceeded against and penalised in adjudication on the basis of third party statements should be afforded effective opportunity to challenge the correctness of the same as per law by cross-examination, if he so desired. If witnesses do not turn up for cross-examination, it is open to the adjudicating authority to proceed with the adjudication without relying on these statements against the person so charged. Failure of witness to appear for cross-examination will not be a ground to penalize the appellants in law when the appellant is entitled to an opportunity of cross-examination of third party on whose statements reliance is placed". Reliance has also been placed on the decision in Emmtex Synthetics Ltd. v. Commissioner of C.Ex., New Delhi - 2003 (151) E.L.T. 170 (T) wherein it has been held by the Tribunal that no presumption on the basis of uncorrborated uncross-examined evidence of person can be drawn about the receipt of the goods in a clandestine manner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces claimed by Sharp Industries were actually delivered to them; that in absence of any direct evidence or statement of any of the person who actually delivered the alleged clandestine material it cannot be alleged by the Department that the appellant received such material and used the same in the manufacture of final products which were cleared clandestinely; that though Shri Akhil Jain has identified the signature of Rajdev Maurya, he has never admitted the receipt of the material in the factory of the appellants; that in respect of one R.R. the delivery of the consignment had been taken by one Gauri Dutt, Peon of Sharp Industries Ltd., who has not been examined by the Department, that similarly Department has not recorded the statement of V.K. Jain who has signed one L.R.; that mere identification of his signature cannot be construed to be receipt of material by the appellants; that V.K. Jain left their employment on 21-7-1993 as he was caught pilfering goods in the company in connivance with a driver, that unless the Department produces the transport documents of all the transactions supported by the statements of the transporter it cannot be assumed that whatever quantity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any person". (iii) Padmanabh Dyeing Finishing Work v. CCE, Vadodara - 1997 (90) E.L.T. 343 (T) wherein it has been held that electricity consumption to work out the probable production is not by itself sufficient to assess the production. (iv) Hans Castings Pvt. Ltd. v. CCE, Kanpur - 1998 (102) E.L.T. 139 (T). 6.Countering the arguments, Shri Kumar Santosh, learned SDR, reiterated the findings as contained in the impugned Order and submitted that during the search of the factory premises of the appellants on 2-8-1994 excess stock of laminates worth Rs. 25.84 lakhs was found; that Shri V.K. Singhal, Director, was not in a position to explain the stock vis-a-vis RG23A, Part I; that he stated that he would prepare a reconciliation statement and furnish the same to the officers; that he, however, has never submitted the same; that again in his subsequent statement dated 9-8-1994, Shri V.K. Singhal could not explain the stock of laminates. He emphasized that the seizure of unaccounted quantity of packing material itself indicates that the appellants were purchasing non-duty paid raw materials for clandestine manufacture of finished goods to evade payment of duty. He, further, mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Tasty Gutkha and Superfit brands used to go in the name of the appellants, Ramlal Shyamlal, Shyam Sunder Sons and Delhi Zarda; that he was informed by Shri Parab of Sharp Industries that such materials were to be delivered at the appellants premises; that Shri S.S. Parav, Partner of M/s. Bhagwati Roadways in his statements has deposed that particulars in the consignment note were filled on the basis of delivery challans, gate passes and invoices given by Sharp Industries at the time of loading of goods. He also mentioned that some of the lorry receipts show that goods were received by the employees of the appellants; that three RRs were signed by Mr. Raj Dev of the appellants; that similarly one LR of Bhagwati Roadways shows that material dispatched for Prakash Zarda was received by the appellants and another lorry receipt of Bhagwati Roadways shows that despatch of material to Shyam Sunder Sons was received by Sharp Industries Delhi for further delivery to the appellants. The learned SDR contended that the plea of spurious market of Pan Masala being in existence is nothing but an after thought; that had there been any spurious market being in existence, the appellants would ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uman Mal v. State of Andhra Pradesh - 1983 (13) E.L.T. 1631 (S.C.). 8.In reply, the learned Advocate submitted that the Revenue has not established its case at all what to talk of mathematical precision; that Akhil Jain, Managing Director of the Appellant-company has nowhere in the statement dated 28-11-1994 admitted the signature of the company's employee on Lorry Receipt/Railway Receipt in the name of other firms alleged to be front companies; that Shri Jain has only stated that apparently the signature of Rajdev Maurya is the same; that no expert opinion had been obtained by the Department in this respect; that he has expressly deposed that the goods meant for Ramlal Shyamlal had not come to their factory and the appellants has no connection whatsoever with M/s. Ramlal Shyamlal, Shyam Sunder Sons, Delhi Zarda or Prakash Zarda. 9.We have considered the submissions of both the sides. The entire case of the Revenue is that M/s. Sharp Industries Ltd., removed laminates without payment of duty to the front companies of the appellants who used such laminates for manufacture of their finished products which in turn were cleared by them without payment of duty. The main reliance has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not appear on that day, and as such full opportunity had been extended to the appellants for cross-examination is without any substance. The Advocate for the appellant had sought adjournment as he had to appear before the Appellate Tribunal in a number of cases. There is no rebuttal of the factual position by the Revenue. Moreover the Adjudicating Authority himself has called the witnesses again for cross-examination on 5-10-2000 which is evident from the letter dated 11-9-2000 intimating the date of personal hearing to the appellants. Further only two persons had appeared on 9-3-1999 and not all the persons whose statements have been relied upon by the Department. In view of these facts and circumstances, the Revenue cannot claim that the appellants have been given full opportunity to cross-examine the witnesses. Accordingly, the statements of these persons cannot be relied upon against the appellants. 10.The statement of Shri A.R. Patel and Shri R.K. Mahajan are admissible in evidence as these two persons had subjected themselves to cross-examination. But the version of these two persons after cross-examination does not advance the case of the Department against the Revenue. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the employees of the appellants. There is also substantial force in the submission of the learned Advocate that Shri Akhil Jain, Managing Director of the appellant-company, has in his statement dated 28-11-1994, only mentioned that "apparently the signature of the photocopy of the LR and that of the bill do tally" but he has never admitted the receipt of the material, that he has deposed that "but the consignment which belong to Prakash Zarda could not have come to us at all"; that he had also mentioned that the person who had signed was not known to him; that similarly Shri Akhil Jain has categorically denied that the goods meant for Ramlal Shamlal covered by RRs had come to the appellants factory. In Kothari Pouches Ltd. v. CCE, New Delhi - 2001 (135) E.L.T. 531 (T) when the Revenue relied upon the documents of transporters to prove clandestine removal of goods by the appellants without any independent corroborative evidence and no evidence was found during search of the appellants' premises, and the authorised signatory of the company had not admitted the charge of clandestine removal, it has been held by the Tribunal that demand of duty is not sustainable. The Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officers verified the stock of finished goods however, no variation was noticed. The charge of clandestine removal of the goods has to be established by Department by adducing tangible, acceptable, cogent and convincing evidence as held by the Tribunal in the case of Emmtex Synthetics Ltd. v. CCE, New Delhi - 2003 (151) E.L.T. 170 (T). In this case the Tribunal has held that no presumption on the basis of uncorroborated, uncross-examined evidence of B.M. Gupta and the alleged entries made by him in the private diary, loose sheets/charts, packing slips could be drawn about the receipt of the polyester yarn by the appellants from the company, M/s. HPL, in a clandestine manner during the period in question. Similarly, no inference could be legally drawn against the appellants of having manufactured textured yarn out of the said polyester yarn and the clearance thereof in a clandestine manner without the payment of duty. The surmise and conjectures cannot take place of legal proof. 12.The learned SDR has emphasized that when the officers visited the factory premises of the appellants, they had found laminates in excess which indicates that they were purchasing non-duty paid raw materia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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