TMI Blog2010 (4) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... as there is no concrete evidence of clandestine removal - revenue is not able to substantiate by any evidence to corroborate the clandestine manufacturing and clearances of the goods – in favor of assessee - E/537/2006 - 693/2010 - Dated:- 1-4-2010 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. REPRESENTED BY : Shri P.R.V. Ramanan, Spl. Counsel, for the Appellant. S/Shri D.B. Shroff, Sr. Advocate, M.S. Nagaraja, and S.N. Kantawala, Advocates, for the Respondent. [Order per : M.V. Ravindran, Member (J)]. This appeal is filed by the revenue against order-in-original No. 7/2005, dated 18-4-2005 vide which the Commissioner as an adjudicating authority has dropped the proceedings initiated by show cause notice No. INV/DGCEI/SZU/40/2002: SCN No. 130/02 : OR. No. 30/02 dated 16-12-2002. The relevant facts and allegations that arise for consideration are as follows : M/s. Dhariwal Industries Limited, (formerly M/s. Dhariwal Tobacco Products Ltd.) Hyderabad (hereinafter referred to as DIL ) were engaged in the manufacture of Manikchand Brand of pan-masala containing tobacco, falling under Chapter sub-heading No. 2404.49 of Central Excise Tariff Act, 1985 and chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of manikchand gutkha were being delivered through SRLT to Good Luck Marketing Pondicherry in the same manner as described above. (v) Payments for such unaccounted transactions were being made in cash. The availability of an amount of Rs. 51 lakhs in cash at the residence of Sri Anis on 20-6-2002, which was seized, was attributable to the cash-receipts from Sri S. Jeetendra/M/s. Jeetendra Agencies in the months of May and June, 2002. (vi) The availability of an amount of Rs. 12.5 lakhs in cash at the residence of Shri Jeetendra on 20-6-2002, which was seized was attributable to the sale-proceeds of Manikchand Gutkha, which was received through TNE without accountal and without payment of duty from DIL. (vii) The Manikchand Gutkha seized at the premises of M/s. Balamurugan Stores, Chennai, M/s. VPM Stores, Chennai and M/s. Saleem Stores, Chennai was out of the unaccounted consignments of Manikchand Gutkha delivered to TNE by DIL. Certain other major transporters engaged by DR for delivery of Manikchand Gutkha to various places were verified as a follow up. M/s. Sri Kaleswari Lorry Service, (SKLS), Autonagar, Hyderabad was found to have been engaged by DIL for delivery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1944 be not demanded. (b) a penalty under Rule 25 of the Central Excise Rules, 2002 for the violations alleged supra; (c) a penalty under Rule 173Q of Central Excise Rules, 1944 and under Rule 25 of the Central Excise (No. 2) Rules, 2001 for the violations alleged supra; (d) a penalty under Section 11AC of the Central Excise Act, 1944 for the violations alleged supra; (e) pay interest under Section 11AB of the Central Excise Act, 1944 on the duty demanded vide (a) above. Show cause notices were also issued to various other persons directing them to show cause as to why penalties should not be imposed on them and also for the confiscation of the goods which were found in the premises of various persons. All the appellants contested the show cause notice before the adjudicating authority. All the appellants also sought cross-examination of various people and the said cross-examination was granted. The adjudicating authority after considering the submissions made came to the conclusion that the charges against the noticees do not stand proved and hence are not sustainable. Coming to such a conclusion he dropped the proceedings initiated by the show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of details like date of booking, delivery etc. (iii) Investigations have also unearthed/pointed out what these entries meant, how they have come about by whom they were made etc. None of these findings have been disputed/disproved. (iv) Inward register of SRLT (D-2) contained numerous details like LR No., the date of booking, the date of receipt of the goods for whom the goods were meant, station from which the goods were booked etc. It showed that Manikchand Gutkha received from Hyderabad were delivered to TNE, Chennai. Both Ramakrishna and Ajay Kumar of SRLT confirmed the same, (v) Both the said persons categorically admitted that representatives of DIL booked the consignments of Manikchand Gutkha at Hyderabad. After delivery Shri Anis of TNE Chennai would collect the documents from the office of SRLT Chennai and send them to DIL Hyderabad. DIL presented the said documents at the time of booking of subsequent consignments. Accordingly, the employee of SRLT wrote the same LR No. for different consignments and the charges were paid in cash. It is because of this no LRs and way bills could be recovered at DIL. (vi) Allegation of non-duty paid clearances from DIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither TNE nor Jeetendra Agencies produced any purchase documents showing purchase of Manikchand Gutkha from any body except DIL. (iii) Private records recovered from Jeetendra Agencies clearly showed the quantities of gutkha purchased, payments made for the purchase and details of sales made to customers between 9/2001 and 6/2002. Documents also showed unaccounted purchases of Manikchand Gutkha by Jeetendra. None of these entries or facts have been denied. (iv) Slips recovered from Velayudham confirmed payments made for purchases of gutkha in coded form. These entries matched with the entries in the notebooks recovered from Jeetendra. Customers to whom Jeetendra Agencies sold the gutkha confirmed the transactions. (v) After the ban imposed by Tamilnadu, TNE arranged such that supplies were made to Jeetendra directly from Hyderabad. This clearly indicated that such gutkha was from DIL and were clandestinely. (vi) Seizure of cash of Rs. 12.51 lakhs from Jeetendra was admitted to be sale proceeds of gutkha. (vii) Applying the principle of preponderance of probability, the charge ought to have been upheld. In respect of clearances through SKLS in the name of Swa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting the same in the purchase registers. It was submitted that the judgments in the case of Kothari Products Ltd., and Kothari Pvt Ltd., does not cover the issue in favour of the appellants as in this case evidence led by the revenue comprising of inward register of SRLT, LRs issued by SRLT, records maintained by Jeetendra Agencies (one of the main dealers in Tamilnadu of Manikchand Gutkha), ara pattis issued by another transporter (SRLS), booking of consignments by representative of DIL or of dealers, evidence of payment towards freight in cash by DIL etc. The above documentary evidence was corroborated by the statement given by the staff. In view of this, it is submitted that the impugned order be set aside and the demands be confirmed against the appellant. 6. Learned counsel appearing on behalf of the respondent would submit that learned Commissioner has recorded detailed finding in paragraph 49.1 of the impugned order and has observed that crucial aspect as to whether the evidence of transportation of goods by SRLT from Hyderabad to Chennai, as reflected in the inward register maintained in SRLT Office, Chennai is sufficient to prove clandestine clearance by DIL requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e occasion and clandestine/illicit/manufacture/clearance of goods by the Respondents, the Department had to produce evidence such as procurement of excess material, excess electricity consumption, purchase of basic packing materials such as Plastic Laminate Rolls (PLR) which is used for manufacture of the pouches, etc. and no such evidence is forthcoming. Even though the Department raided the Respondent s factory in May 2001 and again on 20-6-2002, on both the occasions, the department verified stock of raw materials and finished goods and found no discrepancy. In the circumstances, the Commissioner has rightly pointed out that there is no evidence to prove clandestine manufacture and clearance by DIL. It was submitted that Commissioner in Para 51 has held that his earlier observations would apply in case of alleged clearances to M/s. Good Luck Marketing Agencies, Pondicherry and that the allegations are not substantiated. It was submitted that as regard to other clearances, the Department has relied on some internal memos maintained by the transporters and the department concludes that all goods transported under these memos were to M/s. Good Luck Marketing Agencies, Pondicherry a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the finding that there is no evidence with regard to receipt of unaccounted raw materials, clandestine manufacture, consumption of electricity, receipt of sale proceeds of DIL to specify the allegation of clandestine removal of DIL. He would submit that the decisions of the Tribunal in the case of RA castings Pvt. Ltd. v. CCE Meerut - 2009 (237) E.L.T. 674 (T) and Durga Trading Co. v. CCE Lucknow - 2002 (148) E.L.T. 967 (T) as affirmed by the Supreme Court as reported in 2003 (157) E.L.T. A315 (S.C.) - Com. v. Durga and Kothari Products Ltd. v. CCE, New Delhi - 2003 (159) E.L.T. 1187 (T) would squarely cover the issue in their favour as in these cases, revenue had only relied upon the evidence which was not maintained by the assessees but by third person. It was also submitted that the decision of the Tribunal in the case of Amba Cement Chemicals v. CCE Allahabad - 2000 (115) E.L.T. 502 (T) and CCE Patna v. Universal Polythelene Industries - 2001 (130) E.L.T. 228 (T) will squarely cover the issue in favour of the respondent for the proposition that the clandestine removal is a serious charge which is required to be discharged by the revenue by production of sufficient evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the investigation on the Hon ble Tribunals judgment in the case of Chowbey Sugandhit Tambaku Co v. CCE Patna 2001 (131) E.L.T. 222 (Tri.-Kolkata) and cases cited at 2001 (134) E.L.T. 369 (Tri.) and 2002 (143) E.L.T. 635 (Tri.) are in my view of no help to strengthen the case of the Department. . . 54. I have carefully considered his submissions in this regard. On going through the elaborate investigations conducted, it is seen that basically the investigation centered round the transaction involving the Consignment Agent and Dealers and down stream Retailers. The investigation have also found cash with the representative of TNE, which he admitted as the sale proceeds Manickchand Gutkha. In this context, it is pertinent to analyse the evidence in order to give a finding as to whether the various transactions reflected in the private accounts and the location of cash would go to prove the allegation of clandestine clearances by DIL. In my view, to arrive at a conclusion that these transactions prove unaccounted clearances by DIL is too far fetched. There is no evidence, any sort, to link these transactions to DIL. Merely because TNE is a Consignment Agent of DIL and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no verification of receipt of any other raw material required for the manufacture of Gutkha. It is pertinent to note that when the officers searched the factory premises of DIL, neither any unaccounted stocks of finished goods, raw materials and packing materials, nor any incriminating documents were found. I agree with the submissions made by DIL as reproduced in para 25(xvi) above. Thus there is absolutely no evidence with regard to receipt of unaccounted raw materials, clandestine manufacture, consumption of electricity, receipt of sale proceeds by DIL to substantiate the allegation of clandestine clearances by DIL. Therefore the proposal for demand of duties are not sustainable. 7.3 It can be seen from the above reproduced findings of the adjudicating authority that he has concluded that the evidences produced by the revenue are far too short to allege clandestine removal and that too without any corroborative evidence. 7.4 Revenue has challenged the above said findings on various grounds which are already reproduced by us in earlier paragraphs. 8.1. The challenge of the revenue to the finding of the adjudicating authority is based mainly on statement of the employees o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-2002, Shri Mohd. Anis produced evidences regarding the sale invoices raised by M/s. GME and TNE, to substantiate the purchase and sale of Manikchand Gutkha from M/s. Tamilnadu Enterprises. It can be seen from the statement of Mr. Mohd. Anis, he had categorically stated that all the dealings regarding TNE and GME can be answered only by Shri Mohd. Ilyas who is the proprietor of both the firms. The investigating authorities had summoned Shri Mohd. Ilyas Musa for recording the statement on 20-6-2002, 27-11-2002 and on 28-11-2002. In the statement dated 20th June 2002 Mr Mohd. Ilyas Musa has categorically stated that he is the proprietor of Tamilnadu Enterprises and Good Luck Marketing Agency and also is a partner in Rafiq Brothers. In the said statement dated 20th June 2002 he was asked about the current account maintained by Tamilnadu enterprises, for which he replied that the amounts of sales proceeds received from the customers are deposited in this account and the amounts are paid to Dhariwal Industries Ltd., by cheques from the account. It was also categorically stated that the amounts transferred to Dhariwal Industries represents the proceeds towards the purchase of Manikchand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the above question. They have been issued from two memo books of SRLT. I have signed on first last page of the two memo books as having seen. Each of these memos is for a quantity of 100 cartons consigned to GLMA. I state that we have received only the quantity of Manikchand gutkha in cartons as per purchase invoices of DIL. We have not received the consignments under the memos of SRLT referred to above. Q.11. The transporter viz. Shri Ramkarishna Transport of SRLT and Shri Ajay Kumar, Marketing Manager of SRLT have given statements that consignment of Manikchand Gutkha have been transported on the memos issued from the memo book referred to in the earlier question. They have also stated that all the entries in the inward register of DIL for delivery to TNE have been delivered to TNE and such consignments are those of Manikchand Gutkha. Please offer your comments in respect to the statement of the above two persons of SRLT? Ans : I don t know why the above two persons of SRLT stated so. We have received Manikchand Gutkha consignments as per the invoices issued by DIL in the name of our firm only. 9.3. It can be seen from the above reproduced portion of the statement re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly we send our Vehicle Tata 407 to get the stock of Manikchand gutkha . In case our vehicle is under repair we used to request the factory people to send the stock in their vehicle. Accordingly they used to send the stock of Manikchand Gutkha to our Agepura godown - to your query I state that I do not remember the registration number of our vehicle. Q 9. What are the documents received along with Manikchand Gutkha from factory? Ans : We used to receive two copies of invoice along with stock. To your query I state that Sri Waheed used to count and receive the stock at our godown and on hearing from him I used to inform the factory about the receipts of stock. Q 13. How do you make payments for the gutkha received from Dhariwal Industries Ltd., Hyderabad? Ans : We make payments by cheque on account basis whenever called for by Shri Prashant or Shri Jeevan. Q.14. Who is your dealer for Vijayawada area? Also indicate the names of persons representing the said dealer? Ans : M/s. Om Venkateshwara Traders is the dealer for Manikchand Gutkha for Vijayawada area - the owner of the said firm is known as Chanty. I do not readily recollect his official name. 10.2 It can be seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof at the destination and the versions of the truck drivers with regard to the location from where the consignments were lifted at Noida and delivered to the destination, goes to show that the same did not support the case of the Department. We find that the Commissioner has relied upon the Bill Register of the transport company which was not a relied upon document in the show cause notice and therefore, such register cannot be used in evidence against the appellants. Further, there is no evidence that any payment was made by the appellants on the basis of the Bill Register while in fact Shri Mahendra Pandey stated in cross-examination that the appellant company had disputed certain bills for freight charges. Regarding the cross-examination of Shri Mahendra Pandey, he has admitted as under : (i) the deposition made by him in his statement dated 22-12-1994 was based entirely on the information derived from the records of East India Transport Agency and not from any other source. (ii) there is nothing in the records of East India Transport Agency to indicate the identity of the person who had got booked the consignments under G/R Nos. 9041753, 8041784 and 9464170 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by M/s. KPL without payment of Central Excise duty. Though pre-paid C.N. No. 39516 dated 30-5-1994 has been issued by M/s. EITA but there is no lorry challan or despatch memo of 30-5-1994 giving C.N. No. 39516. It thus appears that there was no transportation of seeds on 30-5-94 but only pre-paid C.N issued for recovering freight for transportation of goods against C.N. No. 9501351 and 9501352 transported on 30-5-94. Since consignment note 9501351 and 9501352 were issued for transportation of goods of appellant No. 1, he paid against these consignment notes and there was no need for pre-paid consignment note. Further this consignment was duty paid and the gate pass for the date of despatch and the goods under despatch were available. There was no lorry challan or despatch memo even according to the notice and hence there cannot be movement of goods (allegedly to be non-duty paid) on 30th May 1994 and so the question of collecting freight through a pre-paid consignment note on 30th May 1994 does not arise. Further there is no dispute that the consignment notes were cancelled and intimation of cancellation was given to the Excise authorities within the stipulated period of 24 ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssumption and presumption are not a substitute for proof. His findings on the charge of excess quantity in one consignment note is reproduced below : I find the investigation has not been able to adduce any corroborative evidence like consignor and consignees name, receipt and delivery at destination or for that matter any statement of either transporter to support the allegation. Hence dropped. Some of the other relevant findings are also reproduced below : In this connection it would be pertinent to point out that the investigating officers had resumed all the cancelled GPIs/invoices of M/s. KPL which were available in the Range office but no credence was given by them to these documents while making out a case against the party. These GPIs/invoices were neither relied upon in the case nor returned to the Range office. In fact this being a very vital document, investigating officers should have reflected and discussed its relevance while describing the details of cancelled consignment notes shown in Annexure C. We find that the ratio of the abovesaid two decisions will directly apply to the, facts of this case also, though the learned Spl. Counsel for the revenue tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oxes = 2500 pouches in one carton Before packing in cartons, these Inner boxes are packed in plastic sleeves as under : 1.5 Gms 5 Inner boxes in 1 sleeve packing 2 Gms 10 Inner boxes in 1 sleeve packing 3.5 Gms 5 Inner boxes in 1 sleeve packing Ans : 1. Supari Cutting machine 1 2. Supari cleaning machine 1 (sifter) 3. Ovens 4 4. Perfume-supari mixer 2 big and 2 small 5. Katha Compound Mixer 1 big and 1 small 6. Katha powder pulveriser 1 7. Tobacco cleaning machine 1 (sifter) 8. Grinders 3 9. Pouch Packing machines 1.5 gms 48 10. -do- 2 gms 18 11. -do- 3.5 gms 18 12 Inner Box Shrink Sleeve Machine 3 13. Strapping Patti Machine 2 Q. 5 What are the capacities of your packing machines? Ans : The capacity of packing machines depends on power, servicing and breaking down in runni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their requirement. The supplies to M/s. Rafiq Brothers are made as per their order in their vehicles or in our vehicle and the same are unloaded at their godown in Agapura. The supplies to M/s. Tamilnadu Enterprises is sent as per their order in our vehicle to M/s. Sree Ramakrishan Lorry Transport (SRLT), Vanasthalipuram, and book in their transport (SRLT) and to M/s. Good Luck Marketing Agencies also, the material is sent as per their order by the booking through the same transport. The transportation charges are paid by DIL for the supplies made to these two Consignment Agents at Tamil Nadu and Pondicherry. Q 11. Please go through the three Inward Registers submitted by SRLT Chennai. In these registers, the details such as LR number etc., pertaining to the consignments booked by DIL for delivery to M/s. Tamilnadu Enterprises are written. From these LR numbers, it is observed that the same LR number is repeated twice or thrice with different dates of booking. All these two or three times, the dates of booking are different. Such repeated entries are available found written in respect of many LRs in many pages of the above registers. The above details are also tabulated in a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peatedly. 20. We find that the investigating authorities have not at all adduced any other contrary evidence disputing the claim of M/s. DIL that they are not using the invoices repeatedly for dispatches of finished goods. It is seen from the records that the quantity of finished goods that was allegedly removed clandestinely, would have required approximately 700 trips for transporting the said consignments. Revenue has not adduced any evidence regarding the crossing of the border of AP into Tamilnadu or Pondicherry, in the form of check posts records or commercial tax department records to indicate that the same invoices were repeatedly used for despatch of goods. It is unacceptable that not even once, dispatches were recorded at the crossing of the border between AP and Tamilnadu by the commercial tax authorities. It is also seen from the records that revenue has not established procurement of unaccounted BOPP film required for the manufacture of such a huge consignment of Manikchand Gutkha, which has been alleged to have been removed, without accounting and without discharging the duty liability. We find that in the case of R.A. Castings (supra), the coordinate bench of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also seen that an identical issue of clandestine manufacture and clearance came up before the coordinate bench in the case of Durga Trading Co v. CCE (supra) wherein the bench held as under : 9. It is well settled that the charge of clandestine manufacture of the dutiable goods and removal thereof without discharging the duty liable by an assessee, cannot be established on assumptions and presumptions. Such a charge has to be based on concrete and tangible evidence. In this context, reference may be made to Oudh Sugar Mills Ltd. v. Union of India - 1978 (2) E.L.T. (J 172) (S.C.), wherein the Apex Court has observed that demand of duty cannot be raised on the strength of assumptions and presumptions. There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. This very principle of law had been applied by the Tribunal in a number of cases and out of those, few are, Amba Cement and Chemicals v. CCE - 2000 (115) E.L.T. 502 (Tribunal) = 2000 (90) ECR 265, Gurpreet Rubber Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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