TMI Blog2013 (11) TMI 1525X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal [Pan Parag India v. CCE, [2012 (6) TMI 100 - CESTAT, NEW DELHI], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. No evidence has been produced by the Revenue to show that GSL has effected sale of such huge quantities of 91929.140 Kgs of DT Polyester Yarn. There is no tangible evidence of GSL having actually produced all the DTY or Twisted Yarn from out of non-duty paid POY supplied by Nova. No transporters’ documents have been seized or produced by the Department to show transport and sale of such huge quantities of POY from Nova to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcoming of purchase of raw materials by Nova for production of POY in such huge quantities, or of payments effected by GSL to Nova fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Central Excise, Ahmedabad-II. The order, which has been challenged in the present appeal, confirms duty demand against the appellant under the following heads :- (i) ₹ 32,07,422/- leviable on 91929.140 Kgs of Draw Twisted Polyester Yarn (DTY), clandestinely manufactured and cleared by the appellant during the period March, 2002 to 15-8-2002 liable to be recovered from the appellant under the first proviso to sub-section (1) of Section 11A of the Central Excise Act, 1944 [hereinafter referred to as the Act ]. (ii) ₹ 73,00,168/- leviable on 214.685 MT of DTY clandestinely manufactured and cleared during the period 1-4-2001 to 30-6-2002, liable to be recovered under the first proviso to Section 11A of the Act. 2. Besides the demand of duty and interest thereon and imposition of penalty against the appellant [hereinafter referred to as GSL ], the impugned order has also imposed penalties upon Mohan Lal N. Gupta [Director of GSL] and Sunil N. Gupta [Director of Nova Petrochemicals Ltd.]. Against both the Directors penalty of ₹ 50,00,000/- each has been imposed by the Commissioner. The Directors against whom penalties have been imposed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onth on cumulative basis. As per the show cause notice, entries in A-19 tally with the entries in A-21. Thus it is a substantive evidence for arriving at the quantities of illicit production of DTY by GSL A-22 is a Note Book (91 pages) maintained by V.N. Parab, which contains the details of Crill No. and number of Crill Positions, etc. As per show cause notice, the entries noticed in this seized record have been chronologically maintained date wise, while some pages contain dates, some pages do not contain date, but from the progressive Crill Numbers entered therein and the merge No., or Lot Number and/or the Denier of either POY viz., 115/68 or the Finished DT Yarn viz., 70/68. These entries pertained to illicit procurement of POY of 115/68 Denier from Nova, which were subjected to Draw Twisting at GSL. The document marked as A-23 is a note book, containing 83 pages, which are serially numbered. The entries contained therein are the details of random samples, drawn from different positions of spindles of the DT machine by the quality control department of GSL. According to the show cause notice, from the note book, it could be noticed that mainly POY of 115/68 Denier has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on an average 10 Kgs of Yarn was loaded and processed on each spindle per day. As per the show cause notice, deposition made by Mohan Lal Gupta shows that the average quantity of 1560 Kgs of DTY was being manufactured by GSL per day. The statutory records show far less quantity of production of DTY. Thus a duty demand of ₹ 73,00,168/- has been made on the quantity of 214.685 MT of DTY, clandestinely cleared during the period 1-4-2001 to 30-6-2002. The impugned order confirms this duty demand against the appellant. 5. Preliminary response was made by GSL vide their letter dated 10-9-2008 and 26-9-2008, in which they requested for cross-examination of the investigating officers as well as the persons whose statements have been recorded during the course of investigation. Two persons, whom GSL requested for cross-examination is namely Rajendra Kaushik (Production Manager) and V.N. Parab. Vide letter dated 7-10-2008, the Joint Commissioner of Central Excise, communicated the decision of the Commissioner stating that the request for cross-examination cannot be acceded to. The reason stated for not allowing cross-examination of Rajendra Kaushik was that there is no referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. The Adjudicating Authority has proceeded to confirm the duty demand of ₹ 32,07,422/- on the reasoning that it could be inferred from Mohan Lal Gupta s statement that on an average 1560 Kgs of DTY was manufactured by GSL per day. Purchase documents produced by GSL show only two purchases of 2084.380 Kgs of POY. Balance quantity required for manufacture of DTY was procured illicitly from Nova. Mohan Lal Gupta put his dated signature on being shown V.N. Parab s statement. He has not stated that V.N. Parab s statement was incorrect. Statement of V.N. Parab is, therefore, correct and admissible as evidence. Statement of V.N. Parab is, therefore, corroborated by the statements of Mohan Lal Gupta. Mohan Lal Gupta, on being shown A/20, put his dated signature on it and did not disagree that the details matched, which means that he has admitted them to be correct. Mohan Lal Gupta, on being shown A/21, put his dated signature thereon and said that the entries are in conformity with the entries in A/19. A/21 is, therefore, a vital piece of evidence for arriving at GSL s production. A/22 carries the signature of V.N. Parab. Mohan Lal Gupta s statement refers to Crill change ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,945/-. The demand of ₹ 32,07,422/- in present appeal pertains to clearance of finished goods DTY clandestinely cleared and manufactured out of POY clandestinely cleared and manufactured by Nova. Clandestine clearance of POY to GSL forms the subject matter of Appeal No. E/1060/2009. This appeal has already been decided in favour of Nova by our Final Order No. A/11207-11219/WZB/AHD/2013, dated 26-9-2013 [2014 (311) E.L.T. 529 (Tri.-Ahmd.]. 7. Shri Paresh Dave, Advocate appearing for all the appellants, before proceeding to argue the case of GSL submitted that as regards the confirmation of demand of ₹ 32,07,422/- he would be adopting most of the arguments made by the ld. Senior Advocate, Shri M. Chandrasekaran appearing along with him in the appeal preferred by Nova. In this factual backdrop, it would be necessary for us to deal with the submissions made by the Senior Advocate, once again in this appeal, insofar as, the same are relevant to the facts of the present case. 8. In the present appeal, the appellant has as early as on 19-11-2004, had requested for cross-examination of the witnesses to examine the reliability and veracity of the evidences brought on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocate. In our opinion, there has been, in the present case, denial of natural justice to GSL by the rejection of the request of cross-examination of the persons whose statements have been relied upon. In the view we are taking, the following decisions relied upon by the ld. Senior Advocate, are in support : In Bareilly Electricity Supply v. Workmen, (1971) 2 SCC 617, the Hon ble Supreme Court had held that when a document is produced in a Court or Tribunal, mere production of the document does not amount to proof of it or the truth of the entries therein . The writer must be produced or his affidavit in respect thereof be filed and an opportunity accorded to the opposite party who challenges this fact. In Swadeshi Polytex Ltd. v. CCE, Meerut - 2000 (122) E.L.T. 641 (S.C.), it was held that if the Adjudicating Authority intends to rely upon the statement of any such persons, the Adjudicating Authority should give an opportunity of cross-examination to the appellant . In Lakshman Exports Ltd. v. CCE, 2002 (143) E.L.T. 21 (S.C.), the Hon ble Supreme Court had held that where an assessee had specifically asked to be allowed to cross-examine the representatives of two c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight, but only that it would depend on the facts of each case. During the hearing held before this Tribunal, and while replying to the submissions on this issue made before us by the ld. Senior Advocate, the learned Special Counsel for the department made reference to the recent decision of the Hon ble Supreme Court in Telestar Travels Pvt. Ltd. v. Special Director of Enforcement, 2013 (289) E.L.T. 3 (S.C.) as supporting the order rejecting cross-examination. In the said case, the Adjudicating Authority had relied upon the statements of two persons and communication received from Indian High Commission in London. These statements under reference were challenged as being inadmissible in evidence as the appellant s request for an opportunity to cross-examine these witnesses had been unfairly declined thereby violating the principles of natural justice. On the other hand, it was argued by the department that right of cross-examination was available to a party under the Evidence Act which has no application to adjudication proceedings under the FERA and Adjudicating Rules framed thereunder. We have caused to the appellant nor was demonstrated by the appellant before the Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority for fresh adjudication on the ground that principles of natural justice have been violated. The ld. Advocate appearing for GSL further relied on the submission made by the ld. Senior Advocate that, the case made against GSL and Nova in the show cause notice is totally unsustainable on facts as well as in the light of the catena of decisions of this Tribunal (some of them affirmed in reference/appeals by higher Courts) on the degree of proof necessary to be adduced by the Department to establish clandestine manufacture and clearance of excisable goods, which, according to him, is totally lacking in the present case. The ld. Special Counsel for the Revenue had no objection to argue the case of the Revenue fully on merits and justify the correctness of the impugned order. We, therefore, proceeded to hear the matter fully and examine the entire case on merits as well. 12. The ld. Senior Advocate while addressing arguments on behalf of Nova had submitted that there is a long line of decisions of Courts and of this Tribunal in the matter of how clandestine manufacture and clearance of goods has to be established by Revenue. He submits that the law, in this regard, has been repe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on record any evidence about clandestine removal of the goods without payment of duty. It was also submitted that there was no evidence placed on record to show that appellants received any amount of sale proceeds of the goods. It was therefore, contended by the appellants that duty was not demandable in the absence of any proof or records. It was submitted that clandestine manufacture and clandestine removal of the goods without payment of duty should have been proved properly, which was not done. It was further contended that the figures recorded in the diary maintained by the Foreman were not corroborated by any other evidence. Several decisions of this Tribunal were cited in support of the contentions of the appellant [CCE, Meerut v. Moon Beverages Ltd., 2002 (150) E.L.T. 976, Kabra Enterprises Others v. CCE, 1999 (109) E.L.T. 571, Kothari Products Ltd. and Others v. CCE, Kanpur, 2003 (159) E.L.T. 1187, CCE v. Raman Ispat, 2000 (121) E.L.T. 46]. This Tribunal cited and followed the earlier decision in the Moon Beverages Ltd. case (supra) to the following effect : it is well settled that the charge of clandestine removal cannot be established on the basis of on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Tribunal, the Hon ble High Court of Punjab Haryana held that even if some record recovered during the raid and was corroborated by some supportable evidence holding that there was admission of clandestine production and removal of goods, it is necessary to have some positive evidence of clandestine production and removal of goods. The question of law preferred whether in the light of the private record discovered during the raid, the Tribunal was right in holding that there was no positive evidence of clandestine production and removal of goods was answered against the Revenue and in favour of the assessee. (v) In T.G.L. Poshak Corp. v. CCE, 2002 (140) E.L.T. 187, this Tribunal considered the issue as to whether the demands can be confirmed on the basis of recovery of exercise Note Books and certain balance sheets maintained by the assessee and in the absence of any corroborative evidence. In fact, in a tabulated form this Tribunal dealt with the judgments which were referred to, to support the plea that demands cannot be confirmed which contained the reason for this Tribunal coming to the conclusion that, in the absence of any corroborative evidence, of a tangible natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flow back, actual manufacture and clearance, excess purchase of raw material, electricity consumption, statement of workers, actual transportation of the goods, and statement of purchasers. It was contended on behalf of the Revenue that the case was based on parallel invoices recovered from the residential premises of the factory manager and accountant. Lorry receipts indicated that there was no movement and even if there was any movement they were not clandestine clearances. The Managing Director of the company had even stated that they were making clandestine clearance of the finished products without recording the same in their books of account. The request for cross-examination of some of the persons whose statements were relied upon was rejected by the Adjudicating Authority only on the ground that the assessee had not given any reason and justification for their cross-examination. This Tribunal held that this approach of the Adjudicating Authority is inconsistent with the law of evidence. On a careful perusal of the entire records of the case, the Tribunal found that there was nothing on record as to unrecorded purchases or consumption of other various raw materials in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that an identical issue of clandestine manufacture and clearance came up before a coordinate Bench of the Tribunal in the case of Durga Trading Company v. CCE - 2002 (148) E.L.T. 967 (Tri.-Del.) wherein the Tribunal 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. J172 (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) = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Senior Advocate, and perhaps rightly so, in the light of their being approved by the higher judicial fora, he had contended that such cases have to be decided on the principle of preponderance of probability. It was not necessary for the Revenue, nor possible, to establish the cases of clandestine manufacture and clearance with mathematical precision as has been observed by the Hon ble Supreme Court in CC v. D. Bhoormull, 1983 (13) E.L.T. 1546. In our view, this submission may be of help to the Revenue only in cases where, in the matter of clandestine manufacture and clearance, there is some tangible evidence of such manufacture and clearance by Nova. This Tribunal has, in the above referred cases, laid down several criteria which could go to establish the cases of clandestine manufacture and clearance. Where such ingredients exist, a contention that a case need not be proved with mathematical precision may become relevant. The decision in D. Bhoormull would not, therefore, be of help to the Revenue in cases where there is no evidence at all satisfying the tests laid down by this Tribunal in the long line of cases referred to earlier. In support of the submission regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We may now proceed to deal with the two demands of duty in the present case : It is the contention of GSL that the demand of ₹ 32,07,422/- was wholly illegal and without any justification because no evidence has been produced to the effect that GSL had actually manufactured the quantity of 91929.140 Kgs of DT Yarn, which is alleged to be cleared clandestinely without payment of duty. It was further submitted that as per Annexure A(1) of the show cause notice it is clear that the figures of the alleged clandestine manufacture and removal has been arrived at on the presumption that GSL had achieved during the period 1-7-2002 to 15-8-2002 an optimum production of 1867 Kgs of DT Yarn. However, there was no evidence showing that GSL had achieved optimum production of 1867 Kgs of DT Yarn during the period of 45 days. There was also no evidence or justification for showing how and why the optimum production was achieved by GSL only for a period of 45 days and not at any other point of time. It was further submitted on behalf of GSL that the figure of optimum production of 1867 Kgs of DT Yarn per day was taken from Register A-21 but in reality no such details were found in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on behalf of GSL it was submitted by the learned Special Counsel, Mr P.R.V. Ramanan that the Adjudicating Authority has confirmed that the duty demand of ₹ 32,07,422/- on the basis of records recovered from the premises of the GSL. Mohan Lal Gupta, Director of GSL on 3-9-2003 has deposed that there are 156 positions on each Crill and on an average 10 Kgs of POY was loaded for processing each day. Thus, total average weight for each Crill were worked out to 1560 Kgs per day. Further, Mohan Lal Gupta had stated that there was Crill change every day and the factory was running in two shifts. From the statement of Gupta the only inference that could be drawn was that on an average 1560 Kgs of DT yarn was being manufactured by GSL each day. It was also submitted that the Adjudicating Authority has also relied upon the seized records titled as A-19, A-20, A-21, A-22 and A-23, the statement of V.N. Parab and comparing the same with the entries made in the A-19, it becomes clear that the figure of 1867 Kgs appearing in all the pages of A-19 register has been mentioned as optimum production for the day and is arrived after considering the aforesaid figure and the time taken for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of duty, liability cannot be placed on GSL on the basis of conjectures and surmises, as the Hon ble Supreme Court emphatically declared in the Oudh Sugar Mills case (supra). We are of the view that there is no tangible evidence produced by the department to establish that GSL has clandestinely manufactured and cleared DTY on which the present demand has been made. We, therefore, set aside the demand of ₹ 32,07,422/- as being illegal and unjustified. 16. As regards the demand of ₹ 73,00,168/-, it is the contention of GSL that the said demand has been made on the basis of seized records i.e. document titled as A-23. It was further submitted that the said demand was purely based on assumptions and presumptions as it has not been established by the Revenue as to who had written the details in A-23. The purpose for making such an entry in the register was also not clear. The Revenue has placed their own interpretation of various words and nomenclature found in the entries in the said register. It was further submitted that the entire basis of demand of ₹ 73,00,168/- was the Note Book containing 83 pages which was seized from the factory and the said Note Book con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvisor In-charge of the DT machine which means that the said records reflected the true and correct working on the DT machine. We have considered the submissions of both parties. We find that no evidence has been produced by the Revenue to show that GSL has effected sale of such huge quantities of DTY weighing 214.685 mtrs. There is no tangible evidence of GSL having actually produced all the DTY or Twisted Yarn from out of non-duty paid POY supplied by Nova or by another company. No transporters documents have been seized or produced by the Department to show transport and sale of such huge quantities of POY from Nova or any other company to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcoming of purchase of raw materials by Nova or any other company for production of POY in such huge quantities, or of payments effected by GSL to Nova or any other company for the excess quantities of POY, clandestinely manufactured and cleared by Nova or any other company and sold to GSL, or even of payments made by the buyers of DTY from GSL made out of quantities alleged to have been purchased by GSL from Nova or any other company. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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