9911796707
TMI Blog2010 (4) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to 1-3-2001, the goods were classifiable under Central Excise Tariff Heading No. 2106.00 and the same was cleared by DIL in pouches of 1.5 Grams, 2 Grams and 4 Grams). The distribution of Manikchand Gutkha was through appointed Consignment Agents and sale was through appointed dealers. The dealers received stocks of Manikchand Gutkha only through the consignment agents. M/s. Tamil Nadu Enterprises, Chennai (hereinafter referred to as "TNE"), M/s. Rafiq Brothers, Hyderabad (hereinafter referred to as "RB") and M/s. Good Luck Marketing Agencies, Pondicherry (hereinafter referred to as "GMA") were the consignment Agents for the States of Tamil Nadu and Andhra Pradesh and the Union Territory of Pondicherry respectively. Intelligence was received by the officers of the Directorate General of Central Excise Intelligence that DIL were engaged in procuring raw materials without accounting them and were engaged in the manufacture of "Manikchand Gutkha" illicitly and selling them without payment of duty, etc., simultaneous searches were carried out by the Directorate on 20-6-2002 at factory premises of DIL, and the premises of other relevant parties like distributors, transporters and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagar, Hyderabad was found to have been engaged by DIL for delivery of gutkha at Yanam. SKLS were found to be maintaining an internal document referred to by them as "Ara patty". This document contained details of Lorry Number, Date, LR No., Consignee's name, freight charged and number of articles to be delivered. This was prepared lorry-wise/date-wise. This record was submitted for the period covering from January 1999 to June 2002 except for certain intermittent periods, which were reportedly not locatable, by them. On close scrutiny, it was observed that many entries were made in the names of "Chanti" and "Swamy". Such entries were correlatable to the sales invoices issued by M/s. Rafiq Brothers in the name of M/s. Om Sri Venkateswara Traders, Vijayawada. Tabulation of entries in the name of Chanty and Swamy in the Ara patties of SKLS and their correlation to the sales bills of M/s. Rafiq Brothers is shown under Annexure-D.4 to the notice. From the documentary evidence secured by the investigation in the instant case, it was concluded that DIL made clearances of Manikchand Gutkha manufactured by them through SRLT without the cover of an invoice and without payment of duty. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges 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 notice. 4. Learned Spl. Counsel appearing on behalf of the revenue would submit that adjudicating authority has not properly appreciated the facts and evidences available on record. He would submit that the issue involved in this case can be split into four different allegations: (a) Transport of Gutkha through Shri Ramakrishna Road Lines (b) Clearance effected to Good Luck Marketing Agency Pondicherry (c) Sales of Tamilnadu Enterprises to Jeetendra Agencies (d) Clearance through Shri Kaleshwari Lorry Service. In the name of "Swamy and Chandy". It is the submission that the consignments of manikchand gutkha were cleared without the cover of invoice and without payment of duty from M/s. DIL to TNE and were transported through SRLT. The Transit documents like invoice, LR, way bill of the consignments delivered earlier were being brought back by M/s. DIL and were being reused to accompany subsequent consignments cleared without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 were not merely based on the depositions of Ramakrishna and Ajay Kumar. These depositions point to the fact that DIL transported Gutkha on various dates and this was confirmed when verification was done with statutory records. As no corresponding entries were available in these records the inevitable conclusion is that such consignments were non-duty paid. (vii) Payments for such unaccounted transactions were being made in cash. The recovery of an amount of Rs. 51 lakhs in cash at the residence of Sri Anis on 20-6-2002 which was seized, is admittedly attributable to the cash-receipts from Sri S. Jeetendra of M/s. Jeetendra Agencies in the months of May and June, 2002. (viii) The recovery of an amount of Rs. 12.5 lakhs in cash at the residence of Sri Jeetendra on 20-6-2002 which was seized, is attributable to the sale proceeds of Manikchand Gutkha which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. (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 'Swami and 'Chanty' learned Spl. Counsel submitted as follows : (i) Authenticity of 'Ara Patties' has not been disputed. Similarly identity of 'Swami and 'Chanty' is not disputed. (ii) Sudarshan Rao (Chanty)'s claim that purchases related to biris and cigarettes were disproved. (iii) Though Rafiq Bros denied having supplied any goods without bills, the fact remains that the number of cartons as per dispatches in 'Ara Patties' were much more than the quantities billed by Rafiq Bros (D-4). (iv) Evidence in the form of supply of printed cartons by M/s. Walnut Packaging (P) Ltd. and packing material by Sanghi Packaging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 requires to be examined. The Commissioner has recorded that DIL has denied the allegation and the investigation has not brought on record any evidence showing receipt of unaccounted raw material, clandestine manufacture, consumption of electricity and receipt of sale proceeds by DIL. 6.1 It was submitted that the allegations of the Department which has been dealt with by the Commissioner in Paras 46-50 relates to Item (i) mentioned in Para 20 above; the Department has alleged that the transporter's internal documents show usage of the same lorry receipt (LR) on a number of occasions with- out corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crepancy. 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 and that the same must have been cleared by the Respondents without invoices and without payment of duty. The Commissioner in Para 51 has rightly concluded that his earlier findings with respect to allegation of clandestine removal based on repeated use of LRs would apply equally with respect to the allegations of clearances to M/s. Good Luck Marketing Agencies, Pondicherry. 6.3. It is the submission that the internal memos which were recovered by the revenue as maintained by the transporters would indicate that the goods were transported in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and the standard of proof which cannot be on the basis of preponderance of probability. In further submissions made, he would submit that revenue has failed to produce any evidence regarding the movement of trucks between AP and Tamilnadu in the form of records from Commercial Tax Departments/Commercial Tax Check posts for the movement of trucks. It is the submission that the quantity of clandestine removal which is sought to be fastened upon the respondent it would mean the respondent should have transported almost 800 truck loads of gutkha from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 the former had sold goods to dealers and others cannot be the ground alleging unaccounted clearances by DIL. Though there could be a suspicion, if at all, about availability of stocks of Manickchand Gutkha with TNE, that cannot point out to manipulations, if any, by DIL. As already stated, there is absolutely no evidence on record either with respect clandestine manufacture or receipt of sale proceeds by DIL from TNE. Therefore it can be concluded that the transactions undertaken 'by TNE with their dealers with respect to Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption 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 of M/s. Shree Ramakrishna Lorry Transport and entries made in the registers of M/s. SRLT and finding of cash in the hands of consignment agent and dealer and seizures of unaccounted gutkha from various dealers and also from the slips recovered from the employee of a dealer and statement of Shri Swami alias Chanty based upon ara patties. 8.2. At the outset we may record the functioning of M/s. Dhariwal industries as is churned out from the records which is as under :- M/s. Dhariwal In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Gutkha from Dhariwal Industries. 9.2. In the statement recorded on 27-11-2002 Shri Mohd. Ilyas Musa has stated as under :- "Q No 8. Do you maintain a stock register at TNE & GMA? Ans : Yes we maintained on daily basis. The stock register shows the opening stock, receipts, quantity sold and the closing stock of Manikchand Gutkha on daily basis. Q No 9. As seen from the inward register of SRLT, consignments were delivered to you which were booked by DIL, Hyd. The LR Nos have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 recorded by the investigating authorities under Section 14 of the CE Act, 1944, that Mohd. Ilyas Musa has categorically stated that they are maintaining stock registers at Tamilnadu Enterprises and GMA. It seems, that the investigation has not further proceeded to correlate the stock registers maintained and recovered from M/s. TNE and GLMA to the entries made in SRLT records. It is also seen that Mr Mohd. Ilyas Musa has specifically stated that they have received consignments of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long 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 from the above reproduced statement that it is categorically stated that Manikchand Gutkha is received from Dhariwal Industries under the invoices and the said stocks were received in the godown and accounted for in the records. Though being repetitive, we may once again, state that further investigation was not conducted with reference to the stock registers maintained by M/s. Dhariwal Industries under the invoices to that of their dealers. There is no evidence of mismatching of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants. 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 paid the freight bills in respect thereof. (iii) it is not the practice of the booking staff of East India Transport agency to open the packages tendered for booking to verify the contents thereof and the contents are mentioned in the records of East India Transport Agency as per declaration made by the party or the party's representative. (iv) the freight bill No. 1158 in respect of the consignme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods 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 hours and in such circumstances, it was necessary for the transporters to identify the person who has booked the consignment or taken delivery thereof, in order to implicate appellant No. 1. If identification is not done, then the transporter can mention any name of his choice contrary to the details contained in the documents but this cannot form the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 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 tried to distinguish the facts in both the cases with this case. We do not agree with the distinguishing factors which have been put forth by the learned Spl. Counsel, on the ground that in the current case before us, as recorded by us herein above, there is no corroborative evidence to indicate that M/s. DIL was involved in clandestine manufacture and clearance of Manikchand Gutkha. Another aspect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompound 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 running. If the machine runs properly, 50 to 55 pouches are produced per minute. Q.6 Do you maintain any record about the number of machine operated per day? Ans : We do nt have any record of above type. Nobody knows for how long the machine runs after is same is started. Hence, we do not maintain any such record. However maintained certain records relating to repairs. Q. 7 What is the record maintained for issue of raw material? Ans : We maintain issue slips for all Modvat raw materials such as Menthol, perfume (S & G) and laminates, sleeves, inner boxes, BOPP Tape ½ and 2" and Supari. Issues of all the materials in Form IV Register." It can be seen from the above reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 computer statement and being shown to you. On being asked about these entries, Shri Ramakrishna (owner) and Shri Ajay Kumar (Marketing Manager) of SRLT in their statements, stated that the LR and Invoice used for booking the first consignment are brought back by DIL and was again used for transporting for the subsequent consignments. Due to the above reason LR no. is appearing more than once in their Inward Register. Please explain about the same? Ans : I have gone through the above inward registers and computer statement and signed on first and last page of three registers and the computer statement of 3 pages in token of having seen. I do not know why and for what reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. 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 Tribunal was considering an identical issue of clandestine manufacture and clearances. The bench held as under : "24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained. 25. The law does not entitle the Revenue to disregard all the statutory excise records as well as audited financial accounts and records of the assessee-company, which have been duly verified and accepted by the competent authorities from time to time no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Industries v. CCE - 1996 (82) E.L.T. 347 and Madhu Foods Products v. CCE - 1995 (76) E.L.T. 197. 10. For want of any legal, tangible and concrete evidence, the duty demand of Rs. 4,64,56,058/- as confirmed by the learned Commissioner along with equal amount of penalty and interest, against the company appellant No. 1, cannot be legally sustained and is set aside." The revenue was aggrieved by this order of the Tribunal and carried it in appeal to Hon'ble Supreme Court and same was dismissed by the Hon'ble Supreme Court as reported in 2003 (157) E.L.T. 315 (S.C.). The ratio of both the decisions very clearly indicate, that in the case of clandestine r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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