TMI Blog2011 (4) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh with Shri R.K. Verma, Authorized Departmental Representative (Jt.CDR DR) for the Revenue. Per Shri Justice R.M.S. Khandeparkar: I have the privilege of perusing the draft of the order prepared by my colleague. With utmost respect, I must say that I am unable to persuade myself to agree to the same. I, therefore, record my reasons separately. 2. Heard at length the learned Counsel for the appellants and Joint CDR and DR for the respondent. Also perused the written submissions filed on behalf of the appellants. 3. Suffice to summarize the case against the appellants as under:- M/s. Kuber Tobacco Products (P) Ltd. were engaged in manufacture of Gutka/Pan Masala bearing brand name KUBER, MOOLCHAND etc. classifiable under Tariff Heading 2106.00, and are hereinafter called as KTPPL . M/s. Kuber International (India), now known as M/s. Kuber Khaini Pvt. Ltd., were engaged in manufacture of Chewing Tobacco and Jet brand Khaini classifiable under Tariff Heading No. 2404.00, and hereinafter called as KI . Pursuant to information received that the appellants were indulging in clandestine removal of goods and evasion of duty, the investigating agency of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders has answered the charge of clandestine removal of goods against the appellants on the basis of capacity of machines installed by the appellants in their factory, the electricity generated by gensets, number of labourers employed by the appellants in the factory and raw materials consumed during the relevant period. All the findings in these regards have been arrived at essentially on the basis of statements of the deponents read with contents of hisaba book, kachcha challans, loose sheets and GRs of the transporters stated to have been recovered in the course of investigation. 5. The findings arrived at by the Commissioner in the impugned orders can be preciously summarized as below. The total number of machines installed were 137 and as per the letter of Chairman of the Board each machine could manufacture 200 pouches per minute and therefore 137 machines could manufacture 27,74,25,000 pouches per month, and all the machines having utilized in three shifts for 25 days in a month, the total production would be 832275000 pouches per month. Therefore, as regards KTPPL is concerned, for the period of 14 months from 07.05.1997 to 30.06.98, the total production ought to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een seized in the course of investigation to hold the charge of clandestine removal having been established against the appellants. All the contentions which were sought to be raised against the said documents including contention regarding illegality of the panchnama and seizure proceedings have been rejected by the Commissioner. While rejecting the said contentions, it has been observed by the Commissioner that it is not the job of the department to prove that the panchas were respectable or not. It has also been stated that it is surprising that the tax evaders are challenging the responsibility of the common person who witnesses the search proceedings. Failure to record the time of commencement and conclusion of search has been held to be a technical lapse. Non seizure of the key of the premises has been held to be not relevant for the decision in the matter. It has also been held that Shri Shubh Karan Bothra was present at the premises at the time of search. It has been held that the keys of the premises were brought by Shri Bothra and the documents were recovered in the presence of Shri Bothra and independent witnesses. It has also been observed that Shri Bothra had stated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pigments of imagination. It cannot be merely on the basis of presumptions and assumptions. 9. In Bute Cosmetics vs. CCE, Trichy reported in 2001 (135) ELT 886, the Tribunal had observed that in modus operandi concerning suppressed production and clandestine clearances, the persons concerned may not keep any record of receipt of raw materials purchased normally through cash payments. Therefore, absence of any evidence alone on this point, ipso facto, cannot rule out clandestine removal. The Department, therefore, has to establish by preponderance of probability that the goods were clandestinely removed. 10. The challenge to the impugned orders essentially relates to absence of cogent evidence in support of the charge against the appellants relating to clandestine removal of the goods, failure on the part of the Department to adduce satisfactory evidence in support of such charge and the findings having been arrived at by the authority in the absence of evidence in support thereto. The main grievance is that the findings are not borne out from the records but are merely presumptions and assumptions sought to be drawn even in the absence of materials on record remotely suggest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer to the important aspects of the documents so that there can be no room to doubt about the genuineness of the document or about the genuineness of the contents of such document, and of course, the seizure thereof. 14. In the matter in hand, the seizure of the documents was under panchnama dated 9.10.1998. The said panchnama and the annexure thereto read as under:- Panchnama dated 9.10.98 Pancha No. 1 Shri Devindra Kumar Bajaj S/o Chaman Lal Bajaj R/o B-54, Vijay Nagar Delhi-9 Pancha No. 2 Sh. Dev Raj Baweja S/o Shri Ramasra Baweja R/o E-13, Mansarovar Garden New Delhi. We the above named Panchas on being called by the officers of Anti Evasion Branch, Central Excise Commissionerate Delhi-I, New Delhi presented ourselves at 4130, Gali Barua, Sadar Bazar Delhi to witness the Central Excise proceedings on 9.10.98. The visiting officers called Sh. Shubh Karan Bothra, authorised signatory of M/s Kuber Tobacco Products Pvt. Ltd. Siraspur Delhi. Sh. Shubh Karan Bothra reached at the above said premises and informed the officers that they are using three rooms of the above said premises as their and opened the locks of the rooms in our presence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 128 to 173 (Written pages) (.044) 18 Neelgagan Duplicate Book 204 to 300 19 do .. 1 to 65 (Written pages) 20 do .. 1 to 97 15. The panchnama undoubtedly states that the locks of the premises were opened by Shri Shubh Karan Bothra. However, it discloses that many of the vital aspects were either ignored to be noticed or recorded for the reasons best known to the investigating officer, or were not disclosed intentionally or otherwise. The panchnama does not describe the premises or the location of the premises with reference to the neighboring surroundings. The panchnama does not describe the interior of the premises nor it specifies the location of the three rooms viz-a-viz the entire building as well as that of the documents alleged to have been found in the premises. The panchanama does not disclose the number of accesses available to the premises and whether the premises were accessible or not from any of those accesses before unlocking the rooms. There is no description of the entire building in which the three rooms, which were allegedly used as the guest house, were situated. The description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart from the alleged documents, which could establish the link between the said premises and the occupants thereof being the appellants. The panchnama also does not disclose as to whether the premises were at all being used for any purpose or not. It was absolutely necessary to find out and record all these aspects precisely which could have certainly helped to verify the truthfulness of the case put forth by the department and the defence sought to be raised by the appellants. 19. The panchnama merely records that the officers on search found certain records. It does not give the description of the so-called records except saying that the same are described in Annexure A . All this information was absolutely necessary to give credibility to the panchanam, particularly when the entire proceedings in that regard are sought to be challenged and disputed. 20. Undoubtedly, there is a Annexure A stated to be giving details of the record found. However, bare perusal of the said annexure would disclose that the same does not give any sort of details of the documents stated to have been found in the premises. One Saraswat duplicate book or attendance register cannot be said to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not leave any room to entertain any doubt as such and for the possibility of planting any article and/ or document by third person or of the scope for interference by strangers with the documents or contents thereof. Obviously, therefore, any article or document seized from any premises is required to be properly sealed after being packed with necessary wrapper or envelop or covering, as the case may be, so as to avoid any possibility of third party interference with such article or document. In the absence of such steps being taken in the course of seizure of the articles or documents, certainly the credibility of not only of the seizure and recovery but of the material seized and recovered can also be doubted. It is also necessary to record not only the description of the premises but also the movement of the officers and the panchas searching the premises and every relevant action of every such person has to be precisely recorded in the panchnama to avoid any doubt about the seizure proceedings. None of such precautions were taken in the cases in hand. 23. In the above circumstances, it is the contention on behalf of the appellants that since the seizure itself was illegal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the search and seizure was in complete defiance of the law and procedure and there was any possibility of the evidence collected likely to have been tampered with or interpolated during the course of such search or seizure, then it could be said that the evidence is not liable to be admissible in evidence. But mere irregularity, and even illegality in the course of search and seizure cannot by itself render the documents seized in the course of such search or seizure to be inadmissible in evidence. Albeit, the relevancy thereof can be certainly questioned. 26. As already pointed out above, it should not be forgotten that the charge of clandestine removal of goods connotes accusation of serious nature and, therefore, requires to be established with cogent evidence. If proved, it can have drastic consequences. Besides, a fair proceedings, with no opportunity to the prosecuting agency to gain advantage of its own wrong or lapse, is the corner stone of our justice system. At the same time, the other side of the coin is that the white colour offenders particularly those defrauding the public exchequer cannot be allowed to enjoy the booty collected by them by taking undue advantag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bothra to the officer before opening of the lock and recorded in the panchnama, in the absence of corroboration thereof, cannot be of any help to the department. It is to be noted that Shri Bothra was not the assessee and according to other records he was incharge of the office at 3909, Gali Barna, Sadar Bazar, Delhi and he was called at the premises No. 4130 by the visiting officers. The identity of those visiting officers is not clear from the panchnama. In fact, the panchnama is totally silent in that regard. Besides, the statement does not clarify the expression their In the circumstances the said statement by itself cannot be of any help to the department to establish link between the appellants and the said premises. It is also contended that the premises 4130 belong to the appellants has been admitted by Shri Moolchand Maloo in his statement. About the alleged admission and the statement of Shri Moolchand Maloo is concerned, it would be dealt with separately herein below. 29. Reverting to the point relating to the documents stated to have been seized in the course of panchnama, admittedly, the author or authors thereof has/have not been identified, nor examined. Once it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. In any case, they being the private documents, unless the link being established between the said documents and the activities of the appellants in their factory, no credibility can be given to the said documents. 32. Undisputedly, the three types of documents which are relied upon to establish the charge are stated to have been seized from the premises No. 4130 under panchnama dated 09.10.98. This is also confirmed by the DR to the specific query in that regard. Documents are described as the hisaba book, kachha challan and loose sheet. Perusal of the Annexure A to the said panchnama however discloses no reference to any hisaba book or kachha challan. The said annexure does not enlist any hisaba book or kachha challan therein. The description of the materials stated to have been seized from the said premises under the said panchnama and described in the Annexure A to the said panchnama do not include any hisaba book or kachha challan. Being so, one wonders whether these were the very documents which were seized from the said premises? If not, how and from where these documents were recovered? We have no clue either from the records before us or from the impugned order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Neither the panchnama satisfies the minimum requirement of rules of procedure nor any credibility can be given to the materials allegedly seized in the course of such panchnama nor to the documents sought to be relied upon in the matter. The appellants are justified in making grievance of prejudice having been suffered by them on account of uncorroborative documentary evidence relied upon by the department. 35. If however, defiance of law and procedure leaves scope for tempering with the material seized, then certainly such material cannot be of any relevancy. In the case in hand, on account of various legal and procedural infirmities in the panchnama proceedings noted above, it is apparent that the entire proceedings have lost their credibility and serious doubt arises even about the credibility of the materials stated to have been collected in the course of such proceedings. 36. It is, however, stated that documentary evidence stand corroborated by admission on the part of Moolchand and Vikas in their statements which were recorded on 17.11.1998. The impugned order further discloses that the said statements were sought to be retracted on 04.12.1998, however, the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir letter dated 30.11.93 giving details of how the concerned parts were used in the Chilling Plant were sufficient to show that they were specifically designed for the purpose of assembling the Chilling Plant. In that respect it was observed that once it is admitted position by the party itself, that those parts were of a Chilling Plant and the concerned party did not even dispute that those parts have no independent use, there was no further need for the department to prove the same. It was in that context it was ruled that what is admitted need not be proved. 40. In the case in hand, not only that the statements were sought to be retracted by the parties, as already observed above, the contents of such alleged admission do not relate to any of the documents stated to have been recovered under the panchnama. In the absence of link between the documents which are sought to be relied upon in support of the accusation of clandestine removal of goods and those documents which are stated to have been recovered in the course of panchnama, the accusation does not stand proved, equally so in relation to alleged admission in the said statements. 41. There is yet another peculiar as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Moolchand Maloo and Sh. Vikas Maloo do not lend any support to the documentary evidence sought to be relied upon by the department in support of charge against the appellants. 44. As regards the statement of Shri Bothra, the same does not lend any support to the department s case and rather creates further doubt in the entire case with reference to premises No. 4130 and the documents alleged to have been recovered therefrom. While the panchnama states that Shri Bothra opened the locks of the premises, the statement by Shri Bothra speaks of opening of a lock of the premises by him. The statement nowhere states that the key of the premises was with the deponent. On the contrary, the statements specifically states that the custom officers were already present at the premises. It is pertinent to note that the statement was recorded on the very day on which the panchnama was conducted. The statement also does not disclose the description of the such documents stated to have been recovered and /or seized by the department from the said premises. The statement speaks of use of premises for residence of certain persons on the line of guest house but does not disclose the premises h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouches per minute. Since there is no evidence that the appellants were not working for more than one shift and assuming that they were working for three shifts, it has been held that appellants were capable of manufacturing 83,22,75,000 pouches per month. 49. As regards the contention regarding the raw material, it can hardly be disputed that there cannot be any clandestine removal of the goods unless the assessee manufactures the same clandestinely and for that purpose procures raw materials clandestinely or utilizes the raw materials without disclosing its utilization. Learned Commissioner has clearly observed in the impugned order that there is no evidence of purchase of major raw materials like supari, tobacco etc even in the loose sheets. In other words, the department could not bring any evidence about procurement of raw materials sufficient to manufacture the final product of the quantity which is alleged to have been clandestinely removed. 50. Similar is the case in relation to the sale of the clandestinely removed goods. Admittedly, there is no material on record which could establish sale of the clandestinely removed goods. Neither the transporters have supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any such person at all. Contention was sought to be raised that the names were fictitious and attempt to locate did not yield fruitful result. In fact, there is no material to support this contention. Besides, the statement recorded of the appellants Director discloses the disclosure of the names of their suppliers and buyers and yet there is no recording of statement of those persons. It is pertinent to note that the statement on behalf of the appellants not only disclose the names but even that telephone numbers. It was, therefore, necessary to collect proper evidence to establish the said fact by collecting cogent evidence regarding the actual production in the appellants factory. 53. The appellants are also justified in making grievance about the failure on the part of the respondent to collect any evidence in relation to either procurement of raw materials by the appellants or sale of final goods so as to justify the allegation against the appellants about clandestine removal of huge quantity of the final product within a short span of time. Admittedly, there was no verification of the capacity of the machines to produce the total quantity per day. Calculation in that r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were of carbon copies, there was interpolation and striking of some writing. The Department did not make any efforts to lay their hands on the originals of those documents. In such circumstances, no evidentiary value could be given to those documents. 56. Undisputedly, there has been no attempt on the part of the investigating agency to ascertain whether entries in the loose papers, hisaba book and kachcha challans were in the hand writing of the authorized signatory of the appellants or any of the employees or the officers of the appellants. Neither there was hand writing examination done nor the necessary evidence to establish the link between the said hand writing and that of any of the employees of the appellants has been placed on record. 57. As rightly pointed out by the Advocate for the appellants, any kachcha records to be made a part of the evidence, the same need to be corroborated by cogent evidence and in the absence thereof, the private records by themselves do not transform into reliable evidence. There is absolutely no corroboration in any manner of the entries in Hisaba Book or loose sheets or kachcha challans. 58. The efforts on the part of the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from the fact that loose sheets are thoroughly unreliable even assuming the said documents can be relied upon it is the contention on behalf of the appellants that the appellants could not have used such a huge quantity of diesel within short span of 20 days. The records nowhere disclose that the appellants factory was running for more than one shift. Considering the same and taking into consideration the generator set of 380 KVA and that 200 KVA was installed in the premises, the Department has failed to establish that for one shift, the generator could have consumed such a large quantity of diesel within 20 days. In relation to 380 KVA for normal shift of 8 hours a day, the consumption of diesel would be 280L. Considering the same for 20 days, it cannot exceed 5,600 L. As regards 200 KVA for normal shift of 8 hours, it would consume 180 L and accordingly for 20 days it cannot exceed the consumption of 3,200 L. Being so, by no stretch of imagination, the appellants could have consumed 29,600 L of diesel within 20 days. The contention of the appellants in this regard is certainly well founded in the facts and circumstances of the case. 63. If however, defiance of law and pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o made entries in a diary relied upon by the department would not vitiate the proceedings. In the facts and circumstances of the case, the charge of clandestine removal of goods was clearly established, and thereupon absence of cross examination of any of the officers was not fatal to the case of revenue. 69. In M.R. Tobacco P. Ltd. vs. CCE, Delhi reported in 2006 (202) ELT 64, the Hon ble Delhi High Court held that author of loose sheets was not identified is of no consequence in view of admission made by Director of firm. It was recorded that the Director had clearly admitted that loose sheets reflected removal of goods from the factory in a clandestine manner. As a matter of fact, there were three godowns of the assessee which were identified during search of the premises and it was found that several machines manufacturing gutkha and pouches were actually not in use. 70. In CCE, Hyderabad vs. Vanifab Engineers Pvt. Ltd. reported in 2006 (206) ELT 893, the Tribunal held that in the absence of any statement from any person from the factory to prove that there has been excess production and clearance of the goods without payment of duty and in the absence of any other evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by documentary evidence. In those circumstances the confessional statements were held as reliable. That is not the case in the matter in hand. We have no documentary evidence supporting any of the statements. 77. In S.B. Steel Industries Limited vs. Commissioner of Central Excise reported in 1999 (107) ELT 713 (Tribunal) the case of the department was sought to be established on the basis of entries made in the private note book by the labour contractor regarding the quantity bundled and loaded during the relevant period. It was held to have been established as the entries in the book were corroborated by the statement of the labour contractor and his partner as also considering the volume of power consumption. On facts, the case is clearly distinguishable. 78. In Sharma Chemicals vs. Commissioner of C. Ex. Calcutta-II reported in 2001 (130) ELT 271 (Tri. Kolkata) the note book entries of production and removal of products recovered from a person whose name was appearing in the list of the workers in statutory records cannot be of any relevancy to establish the charge of clandestine manufacture and removal. Such a charge cannot be sustained on presumption that the persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corroborative piece of evidence and hence the charge was no established. 83. In Raza Textiles Limited vs. Collector of C. Ex. reported in 1999 (44) ELT 233 (Tribunal) it was held that the clandestine removal of goods cannot be established merely on the basis of rough note book of employee when the entries of production in such note book were less then the entries of the production in RG-I on the relevant dates. 84. In Ruby Chlorates (P) Ltd. vs. Collector of C. Ex. Trichy reported in 2006 (204) ELT 607 (Tri. Chennai) held that it is settled legal position that when several raw materials are involved, when a case of clandestine production and clearance is built on clandestine use of raw materials the same should be proven with reference to unaccounted use of such major raw materials. In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of corroborative evidence, a finding cannot be based on the contents of loose sheets of uncertain authorship. Failure on the part of the department to produce evidence of use of inputs to prove that there was manufacture of unaccounted finished product, absence of statements di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances described elaborately hereinabove and, therefore, are not sufficient to establish the allegations against the appellants. 89. The entire evidence sought to be relied upon in support of the allegations against the appellants, being unreliable and uncorroborated, and unsustainable to establish the charge of clandestine removal of goods, it is not necessary to deal with other grounds of challenge in the matter. Suffice to observe that in the absence of cogent evidence on record, the charge of clandestine removal against the appellants cannot be said to have been proved and hence the appeals are liable to be allowed. 90. In the result, the appeals are bound to succeed. The impugned orders are liable to be set aside with consequential relief. Accordingly, I allow the appeals and set aside the impugned orders. ORDER Per: Shri Rakesh Kumar: 91. Since common questions of law and facts arise in all these appeals, the same were heard together and are being disposed of by a common order. The facts leading to filing of these appeals are, in brief, as under:- 91.1 M/s. Kuber Tobacco Products Pvt. Ltd. (hereinafter referred to as KTPPL ) having its registered of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty. 91.3 From the search of 4130, Gali Barna, Sadar Bazar, Delhi, which was conducted in presence of Shri Shubh Karna Bothra, an employee of Shri Mool Chand Malu, a number of documents were recovered, which are listed in Annexure-A to the search Panchbnama. 91.4 The premises at 6041-42, 2nd Floor was found to be used by M/s. Gangaur Foods Pvt. Ltd., (GFPL), a sister concern of KI and KTPPL of which Shri Bajrang Lal Malu was one of the Directors and the company was found to be engaged in the manufacture of Dandia brand Gutka. The search of the premises resulted in the recovery of katcha documents pertaining to M/s. GFPL, cash of Rs.7.36 Lakhs which were placed under seizure. 91.5 As regards search of premises at 5987, Plot No.83, South Nawab Road, Basti Harphool Singh, Delhi, blank invoice/bill books of four companies were recovered:- (1) M/s. Rishi Trading Co., Gali Pahad Wali, Sadar Bazar, Delhi-6. (2) M/s.Swastik Trading Co., 1464, Qutab Road, Sadar Bazar, Delhi-6. (3) M/s.Shyam Tobacco Co., 6468-B, Basti Harphool Singh, Sadar Bazar, Delhi-6. (4) M/s. Shukla Enterprises, 2861, Bagichi Raghunath, Sadar Bazar, Delhi-6. At these premises, one Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was shown page no.11 of the attendance register at S.No.3 of Panchnama dated 9.10.2008 drawn of the search of office at 3909, Gali Barna, Sadar Bazar, Delhi in which GM Sadar Office was written against his name, he stated that he did not understand as to what had been written. 91.8. Summons were served on Shri Mool Chand Malu and Shri Vikas Maloo, Directors of KTPPL and of KI and they appeared before the investigating officers on 17.11.98. Shri Mool Chand Malu in his statement dated 17.11.98 recorded under Section 14 of the Central Excise Act, 1944 stated that he was the Director of KTPPL, that he was also the proprietor of M/s. Kusum Trading Company (KTC), M/s. Kuber Aqua Minerals Ltd. M/s. Kuber Grains Spices Pvt. Ltd., M/s. Green Valley Resorts Ltd., M/s. Blooming Dale Pvt. Ltd., and M/s. Kuber Globals Pvt. Ltd., that M/s. KTPPL were having their factories for manufacture of Gutka and chewing tobaco of Mool Chand brand and kuber brand, that Shri C.S. Baid was of his employee, who was in charge of purchase of raw materials and manufacture of finished goods and their despatch; that the payments for the purchase of the raw materials were being made by him or Shri Vikas Malu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quantities manufactured were being cleared without payment of duty, that in order to maintain and keep the accounting of the goods cleared without payment of duty, entries were first made on loose sheets on daily basis, that subsequently on the basis of entries in loose daily sheets, kachcha challans were prepared in duplicate in the name of the respective distributors, the original copy of which was sent to distributors by courier, that on the basis of kachcha challan, kachcha accounts containing partywise details of sales and receipt of payments were prepared and that payments for non-duty paid were received in cash or through bearer demand drafts. Shri Mool Chand Malu was shown the documents recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi and stating that the same pertained to KTPPL and KI, he further stated that the books at sl.no.8, 9, 10, 12, 16, 17, 18, 19 and 20 were the carbon copies of the kachcha challans in respect of the goods sold to various distributors, that these kachcha challans have been mainly prepared / written by his employee Shri Kishan Sharma, that the books against sl.no.11, 13, 14 and 15 were the kachcha accounts and at sl. nos. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employee of KTPPL, was recorded on 8.2.99, wherein he stated that since November, 1998, he was working with KTPPL, that he was doing the job of dispatching the letters, handling bank transactions and various other work of KTPPL and KI and other firms of Mool Chand Malu, Vikas Malu and their family members, that the entire work relating to production of Gutka and Khaini and the work of marketing of the finished goods and purchase of raw materials was being looked after Shri C.S. Baid, that for local sales within Delhi, Shri Mukesh Kapoor and Shri Gowri Shankar Khattar were responsible, that Shri Gowri Shankar Khattar and his wife were the owner of two firms, M/s.DMC and M/s. NDMC, that Shri Mukesh Kapoor and his wife Mrs. Saroj Kapoor were owning two firms M/s. Ganpati Agencies (GA) and M/s. Ganpati Marketing Co. (GMC), and that Shri Subh Karan Bothra was looking general administration of the office at 3909, Gali Barna, Sadar Bazar, Delhi and he was also looking after the receipt of payments from the buyers. 91.12 The statements of Shri Mukesh Kapoor, his wife, Smt. Saroj Kapoor, and Shri Gowri Shankar Khattar were also recorded wherein they accepted that they were marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise invoices were much lower than the value mentioned in the kachcha challans. The loose sheets in the folder mentioned at S.No.2 of the Annexure to Panchnama dated 9.10.98 of the search of premises at 4130, Gali Barna, Sadar Bazar, Delhi consisted of daily sheets containing details of clearances of Gutka and Khaini, and records of purchase of raw materials/ inputs like plastic lamination, tobacco, and diesel for running of generators. It, therefore, appeared that M/s.KTPPL and KI were clearing Gutka and Khaini without payment of duty in clandestine manner and even in the cases where the central excise invoices had been issued and the duty had been paid, the duty had been evaded by undeclaring the value. Looking to the number of machines and capacity of the machines, it appeared that KTPPL and KI had capacity to manufacture the quantity of the Gutka and Khaini which had been sold under the kachcha challans. It is on this basis that the following two show cause notices were issued to KTPPL and KI and other noticees. 91.15.1 A show cause notice dated 31.07.2000 was issued to KTPPL and others for (a) recovery of allegedly short paid central excise duty amounting to Rs.11,99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h proviso to Section 11 A(1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate under Section 11 A ibid; (b) recovery of differential duty amounting to Rs.1,06,61,306/- in respect of the consignments of branded Khaini cleared during 1.12.1996 to 31.3.1999 period, which was allegedly short paid under Rule 9(2) of such Central Excise Rules, 1944 read with proviso to Section 11 A(1) of the Central Excise Act, 1944 along with interest on it at the applicable rate under Section 11 AB ibid; (c) Confiscation of land and building and plant and machinery of M/s. KI used in the manufacture of goods under Rule 173 Q(2) of the Central Excise Rules; (d) Imposition of penalty on M/s. KI under Rule 9(2) read with Section 11 AC and Rule 173 Q of Rules, 1944 and also under Rule 226 of the Central Excise Act read with Section 11 AC of the Central Excise Act, 1944; and; (e) Imposition of penalty under Rule 209 A of the Central Excise Act, 1944 on Shri Vikas Malu, Mool Chand Malu, Shri C.S. Baid, Shri Subh Karan Bothr,.Shri Mukesh Kapoor of M/s. Ganparti Agencies and M/s. Ganpati Mktg. Co. Shri Gowri Shankar Khattar of Delhi Mktg. Co. and M/s. New D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs.3,47,22,118 + Rs.71,07,737/-) on account of clandestine removal and undervaluation of goods was confirmed against KI under proviso to Section 11 A (1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate as per the provisions of Rule 11 AB ibid; (b) land, building and plant and machinery, etc. of the KI was ordered to be confiscated under Rule 173Q (2) of the Rules, 1944 with option to be redeemed on payment of redemption fine in lieu of confiscation of Rs.3 Lakh; (c) Penalty of Rs.4,18,29,655/- was imposed on KI under Rule 173 Q read with Section 11 AC; and (d) Penalty under Rule 209 A of Central Excise Act, 1944 was imposed on various noticees as under :- (i) Sh. Mool Chand Malu Rs.4 Crores (ii) Shri C.S. Baid Rs.50 lakhs (iii) Shri S.K. Bothra Rs.40 Lakhs (iv) Shri Mukesh Kapoor Rs.50 lakhs (v) Shri G.S. Khattar Rs.50 Lakhs (vi) Shri Akhay Chand Kothari Rs.20 Lakhs (vii) Shri Jarnail Singh Rs.2 Lakh Shri Harmit Singh, Shri Harpal each Singh of M/s. RKRT Road Carriers (viii) Shri Devjee Bhai Rs.20 Lakhs (ix) Shri P. Vishwanath no penalty M.K. Agencies. Against the above order of the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been seized by the department, that there is no proof that hisaba books and kachcha challans pertain to the factories of the KTPPL and KI, that it was not permissible to the adjudicating authority to place reliance on such private records in absence of corroboration by cogent evidence on records, that even the entries of the hisaba books do not disclose that the same relate to the production of goods in the factories of the appellants, that no attempt has been made to locate the writer of the documents and kachcha challan books and hisaba books without which no reliance can be placed on the same, that neither the machines installed in the factory premises of KTPPL and KI were capable of manufacturing of Gutka and Khaini which are alleged to have been sold nor the generators installed in the factories were capable of running the machines for the period which the department alleges, that Shri Mool Chand Malu and Shri Vikas Malu had retracted their statements and hence their statements are of no evidentiary value, that as stated by Shri Subh Karan Bothra at the time of cross examination, he was not present at the time of search of the premises at 4130, Gali Barna, Sadar Bazar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e all the three aspects, as many a times, it is impossible to get the evidence of all the three aspects, that the evidence on record stands corroborated by the statements of deponents, which includes the parties to the proceedings and no value can be attached to the retraction of statement by Shri Mool Chand Malu and Shri Vikas Malu, as the same was done as late as 17 days after recording the statement, that the findings have been arrived at by the adjudicating authority on analysis of the materials on record which includes the documents as well as the statements including the statements of transporters, that the contents of the documents - loose sheets, kachcha challan books and hisaba books had admittedly been written by the persons of the appellants Shri Kishan Sharma and Shri Umed Jain, that as regards cash flow is concerned, there is clear admission in this regard by the appellants, that there is no materials brought on record to show that any part of the seized documents were tampered with or there was any interpolations, that the admitted facts need not be proved and in this regard, reliance is placed on the decisions in the matters of P.K.Ravindran reported in 2003 (156) EL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority in para 56.6 to 56.18 of the order-in-original no.159/2005 dated 30.12.2005 and para 51.7 to 51.14 of order-in-original no.3/06 dated 30.01.2006 retraction of the statement of Shri Mool Chand Malu and Vikas Malu is purely an afterthought and not genuine retraction, that authenticity of the loose sheets, kachcha challans books and hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi stands established by the evidence unearthed on the inquiry with the transport companies and railways and also with the consignees and that FIR by Shri Vikas Malu on 19.08.2000 against Shri Umesh Chandalia regarding mis-appropriation of the money from the company does not help the appellant in any manner as this had been done only to discredit the evidence of Shri Umesh Chandalia and that at the time of search of the appellant s premises, the appellant had no grievances against Shri Umesh Chandalia. Summarising his arguments, Shri B.K. Singh, ld. Departmental Representative pleaded that (a) the plea that the department s case is based on assumptions and presumptions is not tenable, as the entire case is based on documentary evidence in form of loose sheets, kachcha chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays and as held by the Tribunal in the case of Colmbia Electronics reported in 2002 (143) ELT 635 (para 6), belated retractions have no meaning; (g) Hon ble Madras High Court in the case of Dy. Director Enforcement Vs. A.M. Ceaser reported in 1999 (113) ELT 804 (para-9) and Hon ble Punjab Haryana High Court in the case of Shiv Shakti Steel Tubes Vs. CCE reported in 2008 (221) ELT 166 (P H) have held that statements recorded under Section 14 of the Act, 1944 are of the nature of admission and are admissible as evidence unless the same are hit by Section 24 of the Evidence Act and in this case, no evidence has been produced by the appellant that the department has used any threat, coercion or inducement in course of recording of the statements of Shri Mool Chand Malu and Shri Vikas Malu. Shri B.K. Singh, ld. DR, therefore, pleaded that there is no infirmity in the impugned order. 92.3 Shri H. Hidayattullah, the ld. Sr. Counsel in rejoinder pleaded that to prove clandestine removal, receipt/purchase of the raw materials, unaccounted manufacture of finished goods and clandestine removal is required to be proved and if one of these links is missing, the charge of clandestine remov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r family members. The main documents on which the department s case is based are -- (a) documents at Sl.No.2 a folder containing 113 loose papers; (b) documents listed against sl.No.8, 9, 10, 12, 16, 17, 18, 19 20 in the Annexures to Panchnama, which are kachcha challan books, also called Chalani by the appellant and (c) the documents listed at Sl.Nos.11,13, 14 15 which are kachcha accounts and the documents at S.No.14 15, called Hisaba books contain partywise accounts of the sale of gutka and khaini by KTPPL and KI during the period from 1.8.95 to 5.10.98. The kachcha challan books contain the carbon copies of the challans regarding sale of branded Gutka and Khaini and contain the details of the clearances and sales of the gutka and pan masala - consignee s name and address, the quantity and value of the goods, mode of transport, RR nos. in case of dispatch by railways and GR nos. in case of dispatch by road, transport company s name etc. On the basis of kachcha challans, the partywise accounts in the hisaba books had been prepared, as all the sales in kachcha challans are reflected in hisaba books. The loose papers in folder at S.No.2 contain daily sheets regarding clearanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no protest from Shri S.K. Bothra that the premies does not belong to them, it is clear that keys of the premises had been brought by Shri Bothra only. Shri Bothra, as per the statement of Shri Mool Chand Malu and Shri Vikas Malu was the person in charge of General Administration and Coordination work of their office at 4909, Gali Barana, Sadar Bazar, Delhi and therefore it is expected that it is Shri Bothra who would have keys to the premises at 4130, Gali Barna, Sadar Bazar, Delhi which was being used as the Appellant company s guest house. Therefore, just because panchanama does not mention as to who brought the keys of the premises at 4130 Gali Barana, it cannot be concluded that the keys were in the possession of someone other than Shri Bothra. For the same reason, just because panchnama does not mention the time of search and completion of the search, it would not make the search invalid. Moreover, we also find that Shri Shubh Karan Bothra in his statement dated 9.10.98 had clearly admitted that the premises at 4130, Gali Barana, Sadar Bazar, Delhi is being used as guest house of the company and the documents recovered from these premises pertained to KTPPL and KI. Besides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order-in-original no.3/06 dated 30.01.06 and para 58.1, 58.2 and 58.3 of the order-in-original No.59/05 dated 30.12.2005 give the details of such kachcha challans. In some cases invoices had been issued only for a part of the quantity mentioned in kachcha challans and in such cases, the kachcha challans themselves mention the break-up of total quantity into the quantity cleared under invoices and the quantity cleared without invoices. This is a clinching evidence that daily sheets, kachcha challan books and Hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi pertained to KTPPL and KI only. The photocopies of bank pass books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi are of the accounts of various companies of Shri Mool Chand Malu and Shri Vikas Malu and their family members and their presence at this premises clearly indicates that this premises was under their control. As mentioned above, Shri Mool Chand Malu and Shri Vikas Malu in their statement dated 17.11.2000 recorded under Section 14 of the Central Excise Act, 1944 have stated that the premises at 4130, Gali Barna, Sadar Bazar, Delhi was being used as their guest house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, etc. against the officer who recorded the statement, the authority while acting on the inculpatory statement of the maker is not completely relieved of his obligations in at least subjectively applying its mind to the subsequent retraction to hold that the inculpatory statement was not extorted and it thus boils down that the authority or any court intending to act upon the inculpatory statement as a voluntary one, should apply its mind to the retraction and reject the same in writing. The Hon ble Supreme Court in the case of State (NCT) of Delhi Vs. Navjot Sandhu reported in 2005 (11) SCC 600 has held that for invoking Section 24 of the Evidence Act, the allegation that a confessional statement was made under any inducement, threat or coercion provision need not be proved to the hilt, that if it appears to the court that the making of the confession was caused by any inducement, threat or promise proceeding from a person in authenticity, the confession is liable to be excluded from evidence, that the expression appears in Section 24 of the Evidence Act connotes that the court need not go to the extent of holding that the threat etc. has to be proved beyond doubt and that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the same have to be tampered with. Though in this case it has been pleaded by the appellant s counsel that some of the kachcha challans have corrections and interpolations on close examination, we find that as observed by the Commissioner in para 57.17 of the order-in-original No.59/05 dated 30.12.2005 and para 52.16 52.17 of the order-in-original no.3/06 dated 30.01.2006 the cutting and corrections are only in a few challans and that too in challan numbers and there are no correction or interpolations in quantity, value or description of the goods. Such corrections of challan nos. not make the documents unreliable. 94.2.1 It has been pleaded that the author of the seized kachcha challan books and hisaba books have not been identified and hence these documents cannot be relied upon. We do not agree with this plea, as both Shri Mool Chand Malu and Vikas Malu had stated that these documents had been mostly written by Shri Kishan Sharma and Shri Umed Jain. Though the investigating officer summoned both these persons, they have not appeared before the officers, may be under the pressure of the appellants. Therefore, just because the statements of Shri Kishan Sharma and Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KTPPL and contain the details of all the clearances including the clearances made without payment of duty. (2) Seizure of 57 bags of Mool Chand brand Gutka totally weighing 877.8 Kgs valued at Rs.3,76,200/- (MRP) from the premises of KTPPL at the time of officers visit to the factory on 9.10.98 which was in excess to the recorded balance in RG-I Register, which as such represented unaccounted production. (3) Statement dated 17.02.2000 of Shri R.P. Sharma, Authorised Signatory of KTPPL wherein he stated that he was in charge of maintaining the central excise records of KTPPL and KI, while Shri C.S. Baid was in charge of the purchase of raw materials, manufacture of khaini and gutka and their dispatch and that he was entering the figures regarding production and clearance in the RG-I register on the basis of information regarding production and clearances given to him by Shri C.S. Baid and that he never verified the figures given to him by Shri Baid to be entered in the RG-I Register. (4) Loose sheets, kachcha challan books and hisaba books seized from the premises at 4130, Gali Barna, Delhi. While kachcha challan books contain the details of the each clearance, the hisab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India reported in 1996 (83) ELT 258 (SC), (ii) K I Pavunny Vs. Assistant Collector of Customs reported in 1997 (90) ELT 241 and (iii) Surjeet Singh Chhabra Vs. U.O.I. reported in 1997 (89) ELT-465 (SC) with regard to evidence value of inculpatory statement recorded under Section 108 of the Customs Act, 1962, the same have to be treated as substantive evidence. The seizure of 57 bags of Mool Chand Brand Gutka weighing 877.8 Kgs from the premises of KTPPL on 9.10.98 which had not been recorded in the RG-I Register is also clear evidence of unaccounted production, as this quantity of Gutka represents several days production which had not been recorded in the RG-I Register. The records of purchase of raw materials in loose papers within (Sl. No. 2 of the Annexure to the said panchnama dated 9.10.98 of the premises at 4130, Gali Barna, Sadar Bazar, Delhi) show unaccounted purchase of 16383.1 kgs. of plastic lamination, 37330 kgs. of tobacco during just 20 days period from 11.06.98 to 30.06.98 and while this quantity of lamination and tobacco is sufficient for making lakhs of pouches of gutka and khaini, the production of gutka and khaini recorded by KTPPL and KI during this per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation or electricity records or record pertaining to excessive raw material need not be referred to. The Tribunal in case of K. Janardhan Pillai Vs. Collector of Customs reported in 1988 (38) ELT 647 (Tribunal) relying upon the Hon ble Supreme Court s judgement in the case of Collector of Customs Vs. Bhoormal reported in 1983 (13) ELT 1546 (SC) and Kanungo and Co. Vs. Collector of Customs, Calcutta reported in 1983 (13) ELT 1486 has held thus:- So far as trial proceedings in the Criminal Court are concerned, it is the axiomatic proposition of law that circumstantial evidence should point only to the hyphothesis, viz., the guilt of the person and should be absolutely incompatible with the innocence of the persons 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 pre-ponderance of probability would be guiding factor and proof beyond reasonable doubt relevant in criminal prosecution before a Criminal Court cannot be bodily lifted and transplanted in adjudication proceedings where considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emises at 4130, Gali Barna, Sadar Bazar, Delhi which was being used by Shri Moolchand Malu and Sh. Vikas Malu as their guest house, the documents recovered from the railways and transport companies showing that the consignments mentioned in the kachcha challans and hisaba books recovered from the premises of the appellants had, indeed, been transported to the consignees mentioned in the kachcha challans and inquiry with the consignees, clearly show that the KTPPL and KI were involved in large scale of evasion of duty by clandestine removals without payment of duty and just because there is no records of procurement of unaccounted raw materials for the entire period of dispute, it cannot be concluded that there was no unaccounted production and no clearance of finished goods, the details of which are mentioned in the kachcha challan books. Moreover, as discussed above, loose sheets recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi show purchase, during just 20 days period from 11.6.98 to 30.06.98, 16383.1 Kgs. of plastic lamination, 37330 Kgs. of tobacco and 29600 ltr. of diesel for running of generators, which is sufficient for manufacture of huge quantity of Gutk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinely cleared and which they knew were liable for confiscation, penalty has been rightly imposed on them under the provisions of Rule 209 A of the Central Excise Rules, 1944 and the same is upheld. However, since penalty under Section 11 AC has been imposed on KTPPL and KI, penalty on Shri Mool Chand Malu in order-in-original no.159/05 dated 30.12.95 and 3/06 dated 30.01.06 is reduced to Rs.70 Lakhs and Rs.70 Lakhs respectively and penalty on Shri Vikas Malu imposed under order-in-original no.159/05 dated 30.12.2005 is reduced to Rs.70 lakhs. 97. As regards Shri Gowri Shanker Khattar of M/s. Delhi Marketing Co. and M/s. New Delhi Marketing, Shri Pawan Kumar Karnani of M/s. Mahamaya Trade Agencies, Raipur, Shri Dilip Ram Vallabh Sarda of M/s. Dilip Traders, Shri Bhim Karan Jain of M/s. Snow View Exports, Shri A. C. Kothari of M/s. Kothari Agencies, Shri Ashok Chaudhary of M/s. Chaudhary Sales Corporation, All of them are dealers/distributors of KI and KTPPL. On going through the records, it is seen that all of them had received branded Gutka and branded Khaini cleared without payment of duty from KTPPL and KI and had sold the same. The provisions of Rule 209 A of Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that Shri R.P. Sharma, Excise Asstt. regarding the quantity of the goods manufactured to be entered in the RG-I Register, we are of the view that he is also the person involved in dealing with the goods, which he knew were liable for confiscation and hence, penalty under Rule 209 A of Central Excise Act, 1944 has rightly been imposed on him. However, since Shri Vaid, he is only an employee of KTPPL and KI, in our view, penalty of Rs.50 Lakhs vide order-in-original no.159/05 dated 30.12.2005 and Rs.50 Lakhs vide order-in-original no.3/06 dated 30.01.06 is excessive and hence the same is reduced to Rs.5 Lakh each (Rupees Five Lakh) each. 97.3 As regards Shri Subh Karan Bothra as per his initial statement dated 9.10.98 and the statement dated 17.11.98 of Shri M.C. Maloo and Shri Vikas Maloo, he was the person in charge of Sadar Bazar Officer of KTPPL and KI at 3909, Sadar Bazar, Delhi. We agree with the findings of the Commissioner in para 71.3 of the order-in-original no. 159/05 dated 30.12.05 and para 63.3 of the order-in-original no.3/06 dated 30.01.06 that Shri Bothra and Shri C.S. Baid were working in tendem and Shri S.K. Bothra was also involved in the dispatch of the go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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