TMI Blog2012 (4) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... tand imposed on various persons in terms of Rule 26 of Central Excise Rules, 2002 :- (a) ₹ 25,00,000/- on Shri Surendra H. Chhajed, Proprietor M/s. Chandan Tobacco Company, (b) ₹ 2,00,000/- M/s. Manish Roadways. (c) ₹ 2,00,000/- on Shri Devjibhai Gopalji Khaniya of Manish Roadways. (d) ₹ 2,00,000/- on M/s. Balaji Trading Company. (e) ₹ 2,00,000/- on M/s. K.T. Enterprises. 2. As per facts on records M/s. Chandan Tobacco Company is engaged in the manufacture of Pan Masala containing tobacco commonly known as Gutkha. The preventive officer of Central Excise intercepted one truck on 19-1-2005 and the driver of the said truck produced Lorry Receipts of M/s. Manish Roadways as also two bills of M/s. Balaji Trading Company showing transportation of 150 bags of Kuber brand of Gutkha and 100 bags of Mulchand brand Gutkha. Both the bills were issued in the name of M/s. K.T. Enterprises, 20, Ahmedabad Complex, Ahmedabad. To check authenticity of the Gutkha packed in 250 bags totally valued at ₹ 16,25,000/-, the same were detained by the officers under Panchanama dated 19-1-2005. Statement of driver was recorded wherein h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial Research, New Delhi (SIIR for short). The statement of proprietor of M/s. Chandan Tobacco Company, Shri Surendra H. Chhajed was recorded on 20-1-2005, wherein he gave input-output norms of consumption of the main ingredients. As per the statement, the input output norms is stated as under :- For taking a batch of Gutkha of 50 Kgs. (i) Supari 30 Kgs (ii) Flavour 01.080 Kgs (iii) Tobacco Leaves 04.430 Kgs (iv) Catechu (Katha Compound 04.430 Kgs with lime) 4. The SIIR, New Delhi test report was received on 1-6-2005. According to the said test report, the constituents of sample of Kuber brand Gutkha of 1.6 gm per pouch and Mulchand brand Gutkha, 1.6 gm per pouch, as under :- (A) Sample of Kuber Brand Gutkha of 1.6 gm per pouch S/No. Test Observed value In % by mass (in g per 1.6g sachet) 1. Average weight of laminated p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumption of supari in Kuber brand Gutkha and Mulchand brand Gutkha was 75% by mass whereas, as per SIIR norms, the same was 69.1% and 73% by mass for Kuber brand Gutkha and Mulchand brand Gutkha, respectively. Accordingly, they entertained a view that the assessee has overstated the consumption of supari as main raw material for the manufacture of Gutkha to the tune of 8.70% and 2.33% respectively. 6. Statement of Shri Surendra H. Chhajed, was again recorded on 14-9-2005, wherein he inter alia deposed that the brand name owner was M/s. Kuber Tobacco Product Pvt. Limited, Delhi with whom they entered into a franchisee and pay royalty at the rate or ₹ 0.50 per pack of Gutkha (13000 pouches) for use of their brand name; that most of sales by them was to M/s. K.T. Enterprises, Ahmedabad; that they had also appointed M/s. Vinayak Trading Company up to Jan., 2005 and M/s. Balaji Trading Company from Jan., 2005 onwards, as dealers; that both the dealers used to purchase Gutkha from him and sold it out in retail; that they used to pay sale price of Gutkha through cheques; that M/s. Manish Roadways was his transporters; that transportation charges were being paid by the consigne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased by the said appellants and other raw materials of Gutkha. It stand recorded in the impugned order of the Commissioner that almost all suppliers of the raw materials of Gutkha have supplied the details of sales of their goods to the assessee which on being compared with the records of the assessee, found to be tallied. However, as regards supplier of the supari, it is recorded that out of five suppliers, three suppliers could not be contacted as the summons sent to them were received back with postal remarks Not known . The jurisdictional Dy. Commissioner of Central Excise, Guwahati and Superintendent Karimganj informed that no such firm was in existent on the given address and as such, address of these three suppliers of supari were allegedly found to be fake. From the above factor, it was believed that the appellant has procured supari from the sources other than these traders but have managed to obtain and place on record the purchases bills of supari from Assam traders just to reflect the same in their stock register and to adjust the quantity of Gutkha, illicitly removed by them. The Commissioner, in his order has observed that there is a strong case that purchase of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s report of SIIR. The main case of the Revenue is based upon the procurement and consumption of supari, which is the main ingredient of Gutkha. Commissioner in his impugned order has observed that supari is a farm product and its purchasers and traders do not have to maintain production and sale accounts, except raising the bills. As such, supari can be purchased against cash payments. The appellant has shown the purchases of supari from the sources i.e. producers at Assam and traders at Assam or Delhi and as the three suppliers out of five suppliers could not be contacted, evidence of exact quantity of supari supplied could not be brought on record. He has further gone to observe that the assessee might have procured the supari from the other sources but bills have been shown to have been raised from the traders in Assam. As such, he has arrived at a finding that the purchase of supari has been grossly understated by the appellant. He has accordingly taken into account the SIIR analysis report for the consumption of supari and has arrived at hypothetical figure of production of Gutkha from such short found supari. We find the Revenue s stand on the purchases of supari is self-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records and then show excess consumption of the same so as to match the records. It may be noticed here that by entering the excess receipt of tobacco leave in the records, the appellant did not stand benefited at all inasmuch as, there is no Modvat credit, etc., is available on the tobacco leave. As such, there was no motive for the appellant to first show excess receipt of tobacco leaves and then to reflect overstated consumption of the same, so as to match the production of Gutkha cleared under the excise invoices. 14. Similarly, the reasoning adopted by the adjudicating authority for consumption of other ingredients like Lime and Katha, the difference in the consumption is based upon the appellant s claim and use of the same as per the analysis report. For better appreciation we reproduce paras 39 and 40 of the Commissioner s order :- 39. From the above, it can be seen that the assessee has overstated the consumption of Katha and Lime to the tune of 7.77%. It is pertinent to say that the proprietor of the assessee has deliberately claimed the consumption of Katha and Lime together as compound, but it is always issued separately for manufacture of Gutkha. Therefore, from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t finding that the same must have been cleared by the appellants clandestinely. We find that according to well settled law on the issue, the charges of clandestine cannot be upheld on the basis of input-output ratio, without any other corroborative evidence on record, which we find absent in the present case. 15. The Commissioner, in his impugned order has referred to various circumstances and evidence in support of his conclusion of clandestine manufacture and removal. As per the adjudicating authority, the SIIR analysis report found the contents of Gutkha in pouch being 1.7 gms as against the declaration of contents being 1.6 gms. Accordingly, Commissioner has held that appellant cleared 1.7 gms Gutkha by wrongly showing the quantity as 1.6 gms in a pouch and thus, they have removed the excess quantity of Gutkha and evaded the Central Excise duty on such excess quantity. He has further observed that the explanation given by the proprietor that workers on such sealing/filling machine sometimes commit mistakes is without any basis in view of literature and technology of such machine. Accordingly, he has calculated the excess quantity cleared by the appellant involving duty of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumption of various raw materials based upon the analysis report dated 1-6-2005 from SIIR, New Delhi and the consumption as shown by the assessee in their records. We have already discussed that packing of Gutkha from the automatic filing machine is a continuous process carried out on one machine and there can be a variation in consumption of supari in each lot at the time of filing by the machine in pouches. As contended by the appellant that one extra piece of supari in pouch would marginally increase the weight content. In fact, Commissioner has himself observed in Para 64 of his order that the party s contention that there is a variance in consumption of supari in each lot seems to be correct but he has proceeded to record that such negligible variation cannot account for overstated consumption of supari. However, as regards consumption of supari, we have already noted that the Revenue s allegation is self-contradictory inasmuch as at one place they are alleging that suppliers of supari are not available and at other place the allegations are that the supari contents have been overstated as used by the appellants. We further note that the Commissioner has placed undue relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance were being destroyed. He further deposed that he is unable to give the exact quantity of the goods about the above two consignors, which was not accounted for in the records but after reviewing other sources of information, he would give the year-wise amount collected in cash from M/s. K.T. Enterprises i.e. the consignee of the Gutkha in respect of the goods transported from M/s. Chandan Tobacco Company as also from M/s. Balaji Trading Company. He submitted that the transportation amount collected by them in cash was not being deposited by them in any bank. In his subsequent statement recorded on 17-6-2005, he submitted that due to non-availability of information on record he could not recall accurate amount in this regard and that unable to produce as such. The Revenue has treated the above statement as if the said Shri Devjibhai, authorized person of Manish Roadways was trying to mislead the department by not giving the correct information. However, the fact remains that no such information was procured by the Revenue from Manish Roadways so as to link the same with any quantum of clandestine clearance by M/s. Chandan Tobacco Company. There is no specific averment stand ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading Company during the period from 8-7-2004 to 10-1-2005, he has observed that whereas during the said period the sale was 1425 bags of Gutkha, whereas they were received 1045 bags of Gutkha and he has arrived at finding of excess clearances of 379 bags by M/s. Balaji Trading Company. In this connection he has observed as under :- ..Though the above said documentary evidence is not sufficient to prove the involvement of M/s. Balaji Trading Company in the nefarious activity of clandestine removal of Gutkha by the assessee since no complete set of incriminating documents/invoices has been found out from the premises of M/s. Balaji. The fact of dummy trading firm named as M/s. Balaji for taking disadvantage for illicit removal of Gutkha by the assessee has clearly been brought on record by way of recovery of a sale bill book of M/s. Balaji from the possession of the assessee wherein three invoices having Serial No. 168 to 170 all dated 18-1-2005 were prepared and issued for sale of Gutkha to M/s. K.T. Enterprises, and for such recovery of this bill book of M/s. Balaji the proprietor could not explain satisfactorily. As is clear the Commissioner himself is of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n meticulous private records of such ingredients being used by them either separately or by way of missing the same. From the facts and evidence either documentary or circumstantial, it emerges that, M/s. Chandan Tobacco Company, Silvassa have planned, organized and executed a massive operation for evasion of Central Excise duty on their products viz. Kuber and Mulchand Brand Gutkha (Pan Masala with Tobacco). These products are totally dependent on the popularity of the brand. And brand like Kuber and Mulchand are very popular in Gujarat, Maharashtra etc. The assessee has taken franchises for the said brand for M/s. Kuber Tobacco Products Pvt. Limited, Delhi and that as stated by the proprietor of the assessee, he used to pay ₹ 50/- per bag of 13000 pouches of Gutkha as royalty. Thus, the market of both these brands is established in these areas and as such it is very easy for the assessee to cater to demand as arises from the public because for manufacture of Gutkha very sophisticated machinery is not required. Even no complicated method of process is involved in the manufacture of Gutkha. As such the supplies are made only when there is a ready demand and sale proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Silvassa to whom Gutkha was sold out and who in turn sold out the same in retail as well as in wholesale to M/s. K.T. Enterprise, Ahmedabad. The records of this firm on scrutiny revealed that nothing objectionable. Therefore, it leads to believe that this firm was inoperative since May, 2004 i.e. much before the search, seizure and investigation of the case against the assessee thereby the assessee could get sufficient time to adjust the past transactions of illicit removal of Gutkha, whatsoever might be under the guise of this firm as has been reflected in respect of M/s. Balaji Trading Co., Silvassa, which was started from June, 2004 to January, 2005. Hence, no evidence from this angle could be brought on records. The Department has taken a very conservative view while working out the amount of evasion, even though it has been observed that the assessee does not leave any proof of evasion in the main or statutory books of account. As soon as the goods reach certain destination in the Market, he destroys the proof of manufacture and clearance. This has been worked out over a period for the past production and clearance, keeping in view the quantity of supari shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... weakness of the Revenue s case. Admittedly, the excess production is required to be packed in small pouches of printed flexible materials. In the absence of any evidence of procurement of excess packing material and in the light of acceptance of the fact by the Commissioner as regards the purchases of packing materials, tallying with the recorded balance, the findings of Commissioner that the appellant might not have entered the said material in their account so as to accommodate the clandestine manufacture and removal, do not appeal to us, in the light of contradictory findings in respect of supari and Tobacco leaves. The proprietor of M/s. Chandan Tobacco Company, Shri Surendra H. Chhajed in his various statements have submitted that all purchases of packing materials were being reflected in their accounts. He, as also the proprietor of M/s. K.T. Enterprises in their statements have categorically submitted that all the purchases were being made on the basis of documents and payments were being made by cheques. The said part of the statements does not stand controverted or rebutted by the Revenue and no evidence of any financial flow back to the manufacturing company stands produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the tangible, strict, positive, direct corroborative evidence. Even the confessional statement made before the officers do not stand accepted by the Tribunal as a stand alone evidence, unless corroborated by material particular by independent evidence. Reference in this regard may be made to Tribunal judgment in the case of Ghodavat Pan Masala Products Limited v. CCE, Pune - 2004 (175) E.L.T. 182 (Tribunal-Mumbai), Shri Radheyshyam Kanoria v. CCE, Thane-II - 2006 (197) E.L.T. 130 and Pioneer Industries v. CCE, Mumbai-II - 2006 (193) E.L.T. 506. 22. In fact the reference at this stage may be made to the majority decision of the Tribunal in the case of Tejwal Dyestuff Industries v. CCE, Ahmedabad - 2007 (216) E.L.T. 310 (Tri.-Ahmd.). In Para 54 of the decision the Hon ble President, as third Member, observed that having obtained the confessional statement, Revenue officers did not carry out the detailed investigation into the relevant aspects of the case, particularly the Bank accounts of Bhimanis and the working of the assessee s factory. Recording of the confessional statement would not put an end to the investigation and the Revenue officers should be careful to ensure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the confirmation of demand of duty, by applying the ratio of analysis report to all the previous clearances made by the appellant would neither be justified nor warranted in the light of the decisions referred supra. On this ground also, findings of adjudicating authority cannot be upheld. 24. Dealing with the individual instances adopted by the Commissioner as corroborated evidences, we find as follows :- (a) Commissioner has referred to LR No. 43908, dated 7-12-2004 seized from the premises of Manish Roadways reflecting transportation of 25 bags of Gutkha under invoice No. 158 of M/s. Balaji Trading Company, Silvasa, there is no corresponding Central Excise invoice issued by M/s. Chandan Tobacco Company showing payment of duty. He has further found that in the original LR Book contain serial No. 43901 to 44000 seized from the premises of Manish Roadways, similar numbered LR i.e. 43908 was found intact i.e. all four copies thereof being cancelled. Accordingly, he has held that M/s. Manish Roadways has used a parallel numbered fake LR and under the guise of trading firm M/s. Balaji Trading Company, M/s. Chandan Tobacco Company had removed 25 bags of Gutkha containing 3,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gutkha during the period from 8-7-2004 to 10-1-2005. There are no record of clearances of 404 bags of Gutkha [difference of 1449 bags sold by M/s. Balaji Trading Company and 1045 bags of Gutkha received from M/s. Chandan Tobacco Company]. Accordingly, he has concluded that Chandan Tobacco Company has removed 404 bags of Gutkha illicitly without payment of any duty. In this connection he has observed, that some bills have not been traced out from the premises of M/s. Balaji Trading Company or Manish Roadways but as per register of M/s. Balaji Trading Company, stock of 223 bags was shown in balance as on 10-1-2005, whereas during the search of their premises on 19-1-2005, no stock of Gutkha was found lying therein. As such, he observed that it appears that under the above said of missing invoices M/s. Balaji Trading Company must have sold out their remaining stock of Gutkha. We note that charges of clandestine removal cannot be upheld against M/s. Chandan Tobacco Company on the sole basis of above fact. Having held that M/s. Balaji Trading Company was an independent dealer appointed by M/s. Chandan Tobacco Company, the allegation of clandestine removal against Chandan To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H to the show cause notice, the duty demand has been worked out on the basis of quantity of supari found short during the visit and overstated consumption as compared to the test report of the SIIR Delhi of supari by M/s. Chandan Tobacco Co. (hereinafter referred to as M/s. CTC). The amount of duty confirmed on account of shortage found of ₹ 5,70,158/- and on account of overstated consumption is ₹ 40,79,457/- totalling ₹ 46,49,615/-. The department has adopted this approach in view of the fact that the duty evasion worked out on the basis of various other evidences would not have covered the full quantity or the full period. Duty evasion worked out is on the basis of samples got tested with SIIR Delhi, who gave the percentage of contents of various raw materials in the finished products. The differential duty has been worked out on the basis of principal raw material (supari) content in the finished product tested by SIIR Delhi and supari content as per the statement given by Shri S.H. Chhajed, Proprietor on 21-1-2005. It is to be noted that the test report of SIIR, Delhi has not been questioned at any stage of the proceedings and input-output ratio norms given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t period, M/s. Balaji had sold 1049 bags thereby selling excess 404 bags. The officers during the visit also found the details of the invoices Sr. Nos. 151 to 170 in the premises of M/s. Manish Roadways. It was also admitted by M/s. Balaji that they use to prepare bills as per the direction of M/s. CTC and even in respect of Gutkha cleared directly from M/s. CTC, many times the bills were raised by M/s. Balaji only. It was also admitted that several invoices were not accounted. 32. M/s. Manish Roadways also admitted maintenance of parallel LR book, receipt of transport cost in cash, destruction of records relating to removal without payment of duty after the transportation was over. The officers also are able to recover one parallel LR book. In fact, in one case, 4 copies of lorry receipts were also recovered and it is the claim of the department that these goods have been sent under parallel lorry receipt and these 4 lorry receipts were cancelled and kept. 33. The details of electricity consumption were also verified for the year 2003-2004 and 2004-2005. The officers found drastic variation in electricity consumption per kg. in 2003-2004. In Jan., 2004, the electricity consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is a detailed discussion about the excess consumption of supari, tobacco and also consumption of other raw materials vis- -vis the product accounted for by M/s. CTC. In view of the matter I am unable to agree with the view taken that input-output ratio and sample test cannot be accepted as correct. When we take a overall view, it becomes clear that excess raw material consumption was one of the strategies adopted to evade duty so that even accountable production as per raw material consumption would be less than actual and cleared clandestinely. In the absence of any credible defence or alternative evidence provided by M/s. CTC at any stage of the proceedings, both these aspects have to form the basis for quantification of production. Whether the quantification of product on this basis would stand the test of the law or not is a question that will be considered at a later stage in this order. Further, it has to be noted that the department s case is not based only on the input-output ratio but there are several other corroborative evidences which will be discussed one by one. Therefore, full duty demand on the basis of supari consumption is justifiable. 35. It was submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the goods without payment of duty on 19-1-2005 alone by itself cannot lead to finding of clandestine removal for the past period. 36. Next supporting evidence is verification of accounts of M/s. Balaji. First of all, Shri Ganesh Sharma, proprietor of M/s. Balaji confirmed that he used to prepare invoices as per the direction of M/s. CTC. It was submitted that the Commissioner s conclusion that M/s. Balaji was created by M/s. CTC to take advantage of transporting Gutkha without payment of duty is totally wrong since the Commissioner himself found that M/s. CTC had cleared the Gutkha to M/s. Balaji under Central Excise invoices on payment of duty. I have already taken note of the fact that on verification of invoices and the accounts of M/s. Balaji, it was found by the officers that M/s. Balaji had cleared 404 bags over and above the quantity received by them under Central Excise invoices. This coupled with the fact that the truck which was intercepted was going from M/s. CTC directly, would show that the Commissioner s findings are not contradictory at all. On the one hand, M/s. CTC was showing all their clearances to M/s. Balaji and many times was transporting Gutkha direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 14,69,871/-. There was no proper explanation forthcoming either before us or before the original adjudicating authority on this finding. Whether M/s. Balaji was an independent firm or not is not very relevant but the fact remains that the M/s. Balaji was an active participant with M/s. CTC in duty evasion. The fact that all the 4 copies cancelled were found in respect of LR No. 43908 in the book of M/s. Manish Roadways, has been considered by the Commissioner and the Commissioner has come to the conclusion that 25 bags have been removed under parallel LR and there is no corresponding invoice recovered during search operation. It was submitted that clearance cannot be said to have taken place since all the 4 copies were found in fact. This is not supported by the evidence. While LR copies have been found in fact, no invoice copy has been traced. Invoice No. 168 which has been referred to in the parallel LR which has obviously been issued. The discrepancy between the LR and invoice of M/s. Balaji has not been explained by the appellant. Admittedly, M/s. CTC has not issued any corresponding Central Excise invoice for this quantity. The very fact that M/s. Manish Roadways used to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave also ensured that the suppliers in Assam are fake so that no verification of actual quantity sold in Assam to M/s. CTC can be verified. Apparently, Department successfully surprised M/s. CTC after interception of the truck and search. 41. Another submission that was made that the Commissioner has used the words might have inferences etc. and on such basis, the demand cannot be sustained. First such usage is about the percentage of Menthol. In fact, this is not really relevant in view of the fact that consumption of Menthol is not an issue for working out duty liability. He has used words might be containing because no stock of Gutkha compound was found during the search of the factory and therefore sample could not have been drawn and the percentage of Menthol contained in Gutkha compound could not be ascertained. 42. Further, this acceptance that there is variation of consumption of supari in each lot could be correct, does not help the appellant. Because the percentage variation was not indicated by the appellant themselves and in absence of any challenge to input-output ratio declared and the test report, the Commissioner cannot be found fault with his observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le is ₹ 24 lakhs per packing machine per month. On this basis, if 50 pouches are being manufactured, even if we take it on lower side, the assessee engaged in the manufacture of Gutkha of 50 paise pouch would be liable to pay ₹ 6 lakhs per packing machine per month. The appellant produced 7,72,18,200 pouches up to December, 2005 in the year 2004-2005 as per records. If we assume that the total number of machines operated are only 25, the production per packing machine per month would come to 3,43,192 pouches. Even to pay the Excise duty of ₹ 6 lakhs, the appellant has to produce 12 lakh pouches per packing machine per month. Assuming that the appellant makes only a profit of 33%, which would cover all their costs, which is an ultra-conservative estimate, the appellant is required to produce 18 lakh pouches per packing machine per month. This would be 5.3 times the production accounted for by the appellant. The demand for duty by the department during the relevant period is only for 8.7% of the total recorded production. Even after the notification prescribing duty on Pan Masala on the basis of machine capacity, the production of Gutkha continues in the country and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here must be evidence direct or circumstantial to deduce necessary inferences in proof of the facts in issue. There can be no inferences unless there are objective facts, direct or circumstantial from which to infer the other fact which it is sought to establish . The standard of proof is not proof beyond reasonable doubt but the preponderance of probabilities tending to draw an inference that the fact must be more probable. Standard of proof cannot be put in a strait jacket formula. No mathematical formula could be laid on degree of proof. The probative value could be gauged from facts and circumstances in a given case. The standard of proof is the same both in civil cases and domestic enquiries. 50. We can never forget the decision of Hon ble Supreme Court in the case of D. Bhoormull - 1983 (13) E.L.T. 1546 (S.C.), wherein with regard to the smuggling, the Hon ble Apex Court observed as follows :- 30. El Dorado of absolute proof being unattainable, the law, accepts for it probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It should be borne in mind in the case of undervaluation like this, it is extremely difficult to attain mathematical precision. DRI officers do not possess a magic wand which would unfold the entire events which had taken place. On the basis of the available documents and the statements recorded during investigation, they have to come to a conclusion. In a quasi-judicial like this, we are concerned more with a preponderance of probability rather than proof beyond reasonable doubt, as held by various judicial fora. On the basis of the available records, we are convinced that undervaluation to the extent of 65% has taken place. Shri Thomas Mathew has played a crucial role in this nefarious activity. After considering his submissions, we find he is trying to wriggle out of this case on the ground that the show cause notice has not been served on him as per law. The Commissioner has dealt with this issue and we agree with this. S/Shri Ravi Karumbaiah and Thomas Mathew are liable for penalty under Section 112(a). The appellant M/s. CCEPL are liable for penalty under Section 114A of the Customs Act. The differential duty demanded is liable to be paid by them along with the interest. As r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. To constitute reasonable doubt, it must be free from an overemotional response. Doubts must be actual and substantial doubts as to the guilt of the accused persons arising from the evidence, or from the lack of it, as opposed to mere vague apprehensions. A reasonable doubt is not an imaginary trivial or a merely possible doubt, but a fair doubt based upon reason and common sense. It must grow out of the evidence in the case. 37. The concept of probability, and the degrees of it, cannot obviously be expressed in terms of units to be mathematically enumerated as to how many of such units constitute proof beyond reasonable doubt. There is an unmistakable subjective element in the evaluation of the degrees of probability and the quantum of proof. Forensic probability must, in the last analysis, rest on a robust common sense and, ultimately, on the trained intuitions of the Judge. While the protection given by the criminal process to the accused persons is not to be eroded, at the same time, uninformed legitimization of trivialities would make a mockery of administration of criminal justice. This position was illuminatingly stated by Venkatachaliah, J. (as His Lordship then was) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the confiscation proceedings were separate and distinct from prosecution under the Act. However, that difference did not entitle the Authorised Officer to proceed arbitrarily in making an order for confiscation. The above observations would once again show that the standard of proof required in trial in the Court of law, is entirely different when compared with the standard of proof required before a quasi-judicial authority. This decision would again show that the prosecution need not prove the case beyond doubt or beyond reasonable doubt, but what is required to be proved is only of preponderance of probabilities in quasi-judicial proceedings. 56. In case of T. Shankar Prasad v. State of Andhra Pradesh as reported in 2004 (164) E.L.T. 143 (S.C.), the Hon ble Apex Court observed as follows :- 11. Proof of the fact depends upon the degree of probability of its having existed. The standard required for reaching the supposition is that of a prudent man acting in any important matter concerning him. Fletcher Moulton L.J. in Hawkins v. Powells Tillery Stam Coal Co. Ltd. - [1911 (1) KB 988] observed as follows :- Proof does not mean proof to rigid mathematical demon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought reliable materials that there was recovery of money from the accused. In fact the receipt and recovery is accepted. The other factor is the acceptability of the plea of loan, which the High Court itself has not held cogent or credible. The observations of Apex Court would show that the Court has to adopt a process of intelligent reasoning which the mind of a prudent man would do under similar circumstances. The presumption in law of evidence is a rule indicating the stage of shifting the burden of proof. Therefore, on the basis of a set of facts and evidences, a conclusion has to be reached which is that of conclusion what a prudent man would have reached in similar circumstances. In a criminal trial, the Court may see whether such a conclusion is beyond reasonable doubt, in a quasi-judicial proceedings, the authority is required to see whether it is proved by preponderance of probabilities. Once such conclusion is reached, the burden of proof shifts to defence which is required to be discharged by defence by adducing evidence to the contrary. 57. As regards when exactly preponderance of probability can be said to have been met, the observations of Lord Denning in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandard whether it is requirement of as per the quasi-judicial proceedings, or judicial proceedings or even beyond the requirement of criminal trials, it can be said that a prudent man would conclude that duty demanded in this case, has been proved beyond doubt , even though the Commissioner has held it as proved by preponderance of probability. 60. In spite of above conclusion, the fact remains that duty demand is based on estimated production. There are decisions wherein a view has been taken that such estimation on the basis of evidence is perfectly legal and can be resorted to. 61. The Apex Court in the case of Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali, H.M. Abdulali, Siyaganj, Indore as reported in AIR 1973 SC 2266 = (1973) 90 ITR 271 (SC), considered the case where the Sales Tax Officer had made a best judgment assessment. During search operations, a bill book used for 19 days and not accounted for, for sales tax purpose, was recorded. The Sales Tax Officer worked out the evasion by applying the sales as per this bill book for 365 days and demanded sales tax on the estimated sales, where the sales tax officer had made a best judgment assessment. Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to produce any evidence to show process loss of 10% and the demand was upheld. 64. At this stage, it is also necessary to deal with another submission that the test report and the ratio cannot be made the basis for demanding duty for the period from 2002 to 2004. It has to be noted that in this case, as already observed earlier, the test report was never challenged till reply to the show cause notice was submitted. Further, the proprietor nowhere mentioned that they were using different ratios during different periods. In any case, nowhere a submission has been made to show that the appellants were using different ratios of various raw materials during the past period. In fact, the production figures over a period of 2 years have ben summarized in the show cause notice month-wise and nowhere a submission was made that according to the figures given therein, there was a drastic variation in the ratio of the raw materials. This case cannot be compared with the case of Essma Woollen Mills (P) Ltd. v. CCE, Chandigarh - 2001 (134) E.L.T. 262 (Tri.-Del.). In that case, it was observed that the results of the samples taken on a particular date or time, cannot be applied to all cases o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s imposed on these persons and confirmed have to be upheld The impugned order is required to be upheld in toto and accordingly upheld. Sd/- (B.S.V. Murthy) Member (Technical) DIFFERENCE OF OPINION (i) Can interception of truck and seizure of Gutkha be not relied upon being subject of separate proceeding as held by learned Member (Judicial) or has been rightly used as corroborative evidence as held by Member (Technical)? (ii) Can it be conducted that there was no motive for the appellant to show excess receipts of Tobacco and overstate the consumption as held by learned Member (Judicial) or can it be concluded that this was done with a view to ensure that the consumption of tobacco and supari would tally with the quantity of Gutkha produced by the appellant, as held by Member (Technical)? (iii) Based on the records, can it be held that the Commissioner was not clear in his mind about the consumption of supari as held by learned Member (Judicial) or the Commissioner has rightly understood the consumption of supari, as held by Member (Technical)? (iv) Can it be said that M/s. Balaji Trading Co. was not a camouflage/dummy unit and evidences gathered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut ratio cannot be applied to past period as held by learned Member (Judicial)? (xii) Whether suppression of facts and misdeclaration can be said to exist and therefore extended period has been rightly invoked and demand confirmed as held by Member (Technical) or no demand can be upheld as held by learned Member (Judicial)? (xiii) Whether penalty of ₹ 25 lakhs imposed on Shri S.H. Chhajed, Proprietor be upheld as held by Member (Technical) or imposition of penalty cannot be sustained as held by learned Member (Judicial)? (xiv) Whether the penalty of ₹ 2 lakh on M/s. Manish Roadways has to be upheld as held by Member (Technical) or to be set aside as held by learned Member (Judicial)? (xv) Whether penalty of ₹ 2 lakhs imposed on Shri D.G. Khaniya has to be upheld as held by Member (Technical) or to be set aside as held by learned Member (Judicial)? (xvi) Whether penalty of ₹ 2 lakhs imposed on M/s. Balaji Trading Co. has to be upheld as held by Member (Technical) or to be set aside as held by learned Member (Judicial)? (xvii) Whether penalty of ₹ 2 lakhs imposed on M/s. K.T. Enterprises has to be upheld as held by Member (Technical) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Member (Technical)? (vii) Whether the statement of the transporter cannot be relied upon as held by learned Member (Judicial) or the same has to be relied upon as one of the corroborative evidence as held by Member (Technical)? (viii) Can it be said that the finding of clandestine removal are required to be proved beyond doubt and the onus of the same is on the Revenue, which is required to be discharged by production of sufficient and positive evidence as held by learned Member (Judicial) of the finding of clandestine removal are required to be proved by preponderance of probability, as held by Member (Technical)? (ix) Whether the demand of ₹ 5,76,158/- confirmed in the impugned order cannot be upheld on the ground that no other corroborative evidence is available on record as held by learned Member (Judicial) or duty demand has to be upheld on the basis of fact of shortage of supari, input-output ratio given by the proprietor , test report and other evidences as discussed by Member (Technical)? (x) Can duty be demanded on the basis of supari consumption and SIIR, Delhi test report as held by Member (Technical) or can it be said that it cannot be done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i content as 69.1% while the other branded Gutkhas has supari contents as 73.4% and the statement of the proprietor indicated that the appellant s product had 75% of supari. It is his submission that the lower authorities came to the conclusion that the appellant had overstated the consumption of supari in order to manufacture clandestinely and clear Gutkha without payment of duty. It is his submission that the demand has been worked out by assuming excess consumption of various raw materials like supari, lime, etc. vis-a-vis test report, of Shriram Institute of Industrial Research, but while calculating the demand, the entire purchase of supari, which is the main ingredient was not investigated and clandestine purchase, if any, was not brought on record. It is his submission that clandestine manufacture of the final product is based merely on the assumption and presumption as well as on the basis of statement of the appellant s proprietor and report of SIIR. It is his submission that there is no investigation or evidence of source from which the supari was purchased by the appellant, inasmuch as the contradictory findings have been recorded by the adjudicating authority in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the appellant is also relies upon the judgment of the Tribunal in the case of Ghodavat Pan Masala Products Ltd. v. CCE, Pune - 2004 (175) E.L.T. 182 (Tri.-Mum.) and in the case of Pioneer Industries v. CCE, Mumbai - 2006 (193) E.L.T. 506 for the same proposition. It is his submission that the entire case of the Revenue is based upon the confessional statement, but the settled law indicates that only confessional statement is not enough and there has to be some corroborative and concrete evidence. 71. Ld. SDR, on the other hand, would take me through the order recorded by Hon. Member (Technical). It is his submission that the proprietor of M/s. Chandan Tobacco Co. had clearly admitted the actual shortage of supari and flavour and excess of packing material and tobacco on the date of visit of the factory premises. It is also his submission that there are purchases of unaccounted packing material and inputs, gathered during the investigation and preparation of fake invoices by the traders of the assessee. It is his submission that proprietor of trader, in his statement, admitted clearances of the goods on fake/unaccounted invoices/bills, which accompanied the consignment t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he background facts, have been seen. 75. As rightly observed by the Hon ble Member (J), it should not be forgotten that the charge of clandestine removal of goods connotes accusation of serious nature and therefore is required to be established with cogent evidence, and while the evidence obtained cannot be discarded totally but should be scrutinized and examined carefully and what weight should be attached to such material should be decided depending upon facts of each case. 76. The ld. Representatives for the Revenue have taken me through the findings and the material which the ld. Member (Technical) has considered in support of the charges in the two show cause notices. 77. As per the Revenue, the above evidence is sufficient to sustain the charge. I find that at first blush, it may appear to be sufficient, however a deeper scrutiny reveals to the contrary. The above evidence is not relevant and credible material evidence, sufficient to establish the case against the appellant-company even applying the test of preponderance of probability and requires too many assumptions and presumptions to uphold the allegation of clandestine removal and undervaluation. 78. It woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and clearance is built on clandestine use of raw materials, the same should be proved with reference to unaccounted use of all such major raw materials . 22. 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 chits of uncertain authorship. Department has not produced evidence of use of inputs to prove that there was manufacture of unaccounted finished product .. 81. Moreover, in the case of Atlas Conductors [2008 (221) E.L.T. 231 (Tri.-Mum.)], this Tribunal has taken a clear view that the demand cannot be on presumption of manufacture but on the basis of actual manufacture which is the basis to come to conclusion, and I notice that the findings of the adjudicating authority are without any evidence and is not correct view and is liable to be set aside. 82. My above view are fortified by a recent case in the case of Viswa Traders Pvt. Ltd. Others v. CCE, Vadodara being Final Ordar Nos. A/1846-1851/WZB/AHD/2011, dated 1-11-2011 [2012 (278) E.L.T. 362 (Tri.-Ahmd.)], a similar issue of clandestine removal was decided by co-ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of unauthorized payment towards unaccounted purchase of goods and utilization thereof in the manufacture. There was no recovery of any unaccounted sales proceeds in substantial cash from the factory or office premises or anywhere else in the control of the appellant company, backed by any confirmation oral or written from the person giving such cash against goods removed in clandestine manner without payment of duty from the factory of appellant company. 85. I find that in the peculiar facts of this case, for confirming the charge and for accepting the evidence adduced, a series of assumptions and presumptions are to be made, viz. - (i) The total number of machines installed was having the capacity to manufacture the final goods held being clandestinely removed and there is no evidence of working for more than one shift a day. As per the appellant, the production capacity with such machines, in one shift, is not sufficient to manufacture the alleged huge quantity alleged to be removed in clandestine manner, and moreover, the duty fixed by the Board per machine, if taken into account would also indicate much less production than alleged in the Notice. As rightly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing DG set for generation of electricity for utilization in running the Gutkha machinery. 86. There is no dispute on the fact that in adjudication proceedings, the charge of clandestine removal and undervaluation is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions. Suspicion however grave cannot replace the proof. As rightly pointed out by the Hon ble Member (J) with detailed findings, the link between the documents recovered in search and the activities of the appellants in their factory is required to be proved. However, I find that due to various reasons, the Revenue has failed to prove the same. 87. I find that the entire case proceeded on the footing that the appellant has understarted the consumption of main raw materials and confirmed by SIIR, which is again not free from doubt. I find that for considering the same as relevant and credible material, on one hand a series of assumptions and presumptions are to be made, and on the other hand various fatal infirmities as to equating appellant s products with branded products contents of raw material, no evidence of purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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