TMI Blog2014 (12) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-EX(DB) - Final Order No. A/54559-54565/2014-EX(DB) - Dated:- 2-12-2014 - Ms. Archana Wadhwa, Member (J) and Shri Rakesh Kumar, Member (T) Shri K.K. Anand, Rupendra Singh, S.C. Kamra, Ms. Surabhi Sinha, Balbir Singh, Pawan Sri Agarawal, Dinesh Prakash and Anil Malhotra, Advocates, for the Appellant. Shri Pramod Kumar, Jt. CDR, for the Respondent. ORDER [Order per : Archana Wadhwa, Member (J)]. - All the appeals are being disposed of by a common order as they arise out of the same impugned order passed by the Commissioner, Central Excise, Kanpur, vide which he has confirmed demands of duty of ₹ 5,41,59,691.20/- {Rs. Five Crore forty one lakh fifty nine thousand six hundred ninety one and twenty paise} against M/s. Ashwini Company on the allegations and findings of the clandestine manufacture and removal of their final product during the period 1995-96 and 1996-97, along with confirmation of interest. In addition, penalty of ₹ 6 crores stands imposed on the said appellant in terms of Rule 173Q of the Central Excise Rules for the clearances effected prior to 28-9-1996 and mandatory penalty of ₹ 84,75,070/- stands imposed under Section 11AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered from the Railways led the Revenue Officers to believe that the appellant was making dispatches through the Railways in the fake names and addresses of the consigners and consignees as also by misdeclaring the contents of such consignments. Large number of consignments were found to have been booked by one D. Kumar or Shiva under the fictitious address of 170 T.P. Nagar, Kanpur. Lot of correspondence was also exchanged between the appellant and the Revenue as regards the various RRs issued by the Railway Authority. Statement of Chief Parcel Supervisor of the Railways was also recorded. Investigations were also made at the end of the other Gutkha Manufacturers located in that area manufacturing goods under different Brand Names of Vimal , and Sagar etc. Elaborated investigations were made at the end of the appellant s dealers M/s. Vijaya Agencies located at Warangal. Further, investigations were conducted at the end of the supplier of the lamination i.e. M/s. Classic Products Private Ltd. and the other suppliers in support of the Revenue s stand that they were procuring the packaging materials in a clandestine manner. Investigations were also made with the various transporter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers. The Adjudicating authority allowed cross examination of only 4 persons, out of which 2 persons did not appear and only 2 persons caused appearance. The Commissioner has referred to the provision of Section 9D of the Central Excise Act for disallowing the cross examination of the others. It stands argued before us that while the adjudicating authority has allowed cross examination of 4 persons, the denial of cross-examination of the balance deponents by referring to the provision of Section 9D was a self-contradictory order and such pick and choose method on the part of the Commissioner cannot be accepted. It stands submitted that provisions of Section 9D are not applicable inasmuch as the same relate to a situation where the witnesses could not be produced on account of impossibility. Ld Advocate submits that any statement recorded under Section 14 is subject to the limitation as enshrined under Section 9D. The sub-section of the said section relates to the admissibility of the statement when the person who made the statement is dead or cannot be found or is incapable of giving evidence. Otherwise, the admissibility of the statement is subject to examination of the witness be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port the Revenue s stand of clandestine activities of M/s. Ashwini and Company. It is also his contention that cross examination is not necessary in each and every case when the statements recorded are clearly pointing out to the clandestine activities of the assessee. 11. After appreciating the submission made by both the sides we find that the Revenue s allegations and findings are mainly based upon the statements recorded during the course of investigation, some of which are inculpatory, some neutral and some stand retracted. We may here make a short reference to the statement. 11.1 Shri Akhilesh Kumar Sahu, partner of M/s. Ashwini Company, in his statement recorded on 20-11-1996 detailed about the number of grinding machines, driers mixtures and packing machines installed in their unit and clarified that the loose Gutkha bags manufactured by them were being sent to their Unit No. 1. Statement of Shri Anoop Kumar Sahu, another partner, recorded on 20-11-1996 deposed that they were manufacturing Madhu Brand Gutkha as also Shalimar and Yogi Brands etc. The dispatch of Gutkha was undertaken through Rail as also by Road transporters, namely, M/s. Pawan Carrying Corporation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered to Vijay Agency. The statements of other employees of M/s. Verma Roadways was also recorded indicating that along with Madhu Gutkha they were also transporting other brands like Aasiki, Sagar, Vimal etc. The goods transported to Hyderabad under fictitious names were brought to Warangal by local transport. Similarly statements of the various representatives of Vijay Agency, Warangal, also stated that the goods were being sent to them under fictitious names of the consigners. However, they also clarified that apart from Madhu Brand they were also dealing in other Brands of Pan Masala. The investigations made at the end of the classic pouch were to the effect that most of their production is sold to Ashwini Company who purchased some quantity against bills for which payments were made by check but major part of the goods were being sent against cash in the names of the Third parties and the invoices were being accordingly issued. To the same effect were the statements of the representatives of M/s. R.K. Products. 12. We note that most of the statements recorded by the department from the various ends are to the effect that most of the times, it was M/s. Ashwini Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and Court is of the opinion that having regard to the circumstances of the case the statement should be admitted in evidence in the interest of justice. One thing becomes clear from the provisions of the said Section 9D that a deponent of the statement has to be allowed for cross examination, during the course of adjudication, unless it is impossible to produce that person on account of circumstances enumerated in Clause (a) of Section 9D(1). The Commissioner, while denying the cross-examination of the deponents of the statements has referred to the said Section 9D, without recording any finding that such deponents are not available for cross examination on account of the circumstances mentioned in the said section. Neither, after examination, he has arrived at an opinion that the statement has to be admitted. As such we are of the view that the denial of cross-examination by the commissioner by referring to the provisions of Section 9D is not appropriate. Reference can be made to the Hon ble Delhi High Court s decision in the case of J K Cigarettes Ltd. v CCE, 2011 (22) S.T.R. 225 (Del.). While upholding the constitutional validity of the said section, the Court observed as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was Warangal. Specific denials were made in respect of clearances through Verma Roadways. Though, Shri Anoop Kumar Sahu retracted from the statements as also produced evidences to support his case and rebut the allegations made by the Revenue, he was never subsequently called and confronted with the various evidences collected by the officers or with the statements recorded by them during the course of the examination. His clarification was never sought, though the investigations continued for a long period, till April 1999. 17. The major part of the demand (almost more than 50%) stands confirmed in terms of Annexure A-11 (a) to the show cause notice, which is based upon the railway receipts procured by the Revenue for the period 15-4-1994 - 19-11-1996. The Revenue s cases that all the consignments booked through the railways by one Shri Rajiv @ Raju under the code of Shiva and D. Kumar , showing the address of the consigner as 170 TP Nagar, Kanpur, were actually the clearances of the Madhu Brand Gutkha and Sweet Supari manufactured by the appellant. The Revenue has procured a chart from the Railways showing the details of the RRs issued by them wherein the goods shown to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nments booked under the name of D. Kumar also pertained to the present appellant. In the absence of any efforts made by the Revenue to produce evidence so to connect the consignments booked under the name of Shiva and D. Kumar and showing the consigner s address as 170 TP Nagar, Kanpur, and further showing the said address to be belonging to the appellant, it has to be held that the entire case of the Revenue is based upon the assumption and presumption. All the consignments booked, showing description manufactured Tobacco/Zarda from the Kanpur Railway Station, cannot be held to be the consignments of Gutkha of Madhu Brand, without any evidence to the contrary. If the Revenue is alleging that the appellant were removing the goods clandestinely from Kanpur Railway Station by using fictitious name and address of the consigners and consignee and by misdeclaring the description of the goods, they are under a legal obligation to prove so by production of independent corroborative evidence and no assumptions and presumptions can be made that all the railway bookings by Shri Raju where the consigner s address was shown is 170 TP Nagar, Kanpur, were that of the appellants products. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to have been remitted from Madras to Bombay belonged to the assessee and it was not enough for the Revenue to show that the amount was remitted by Tilokchand, an employee of the assessee, to Nathirmal, another employee of the assessee. It is quite possible that Tilokchand had resources of his own from which he could remit the amount of ₹ 1,07,350/- to Nathirmal. It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Revenue. Unfortunately for the Revenue, neither Tilokchand nor Nathirmal was in the service of the assessee at the time when the assessment was reopened and the assessee could not therefore be expected to call them in evidence for the purpose of helping the Revenue to discharge the burden which lay upon it. We must therefore hold that there was no material evidence at all before the Tribunal on the basis of which the Tribunal could come to the finding that the amount of ₹ 1,07,350/- was remitted by the assessee from Madras and that it represented the concealed income of the assessee. 21. Tribunal in a number of cases has observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso. Further in the said statement he has nowhere clarified that the code Shiva, under which he was booking the consignments belonged solely to Madhu Brand. He was never confronted with the railway receipts or the forwarding notes so as to seek his comments on the consignments booked under those RRs. We also find that though Shri Raju has nowhere accepted that the symbol D. Kumar was also being used by him and was relatable to the production of the present appellant, the Revenue has even included those clearances for the purpose of demand of duty, further who prepared the forwarding notes on the basis of which railway receipts were being prepared by the railways nowhere stands clarified by any person. 23. We also note that the Revenue has referred to the statement dated 21-11-1996 of Shri Suraj Prakash Tripathy, senior parcel clerk Northern Railway, Kanpur wherein he deposed that one person was recognized as Madhuwala who was doing the business of booking the consignments of Madhu Brand Gutkha, though, the description of the goods was being shown as manufactured Tobacco and the symbol as Shiva. This statement also does not further the Revenue s case inasmuch as even as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire consignments booked under the railway receipts by one Shri Raju under the code of Shiva or D. Kumar were in respect of Madhu Brand Gutkha manufactured by the appellant, which stands clandestinely cleared by them, without any reference to the evidence connecting such RRs to the appellant or without any deposition to that effect by Shri Raju or by referring to any independent corroborative evidence, is too assumptive and presumptive in nature. Such findings defy the basic principles of evidence as enunciated by various decisions of the higher courts that there should be clear direct positive evidence to pronounce the accused guilty. We shall be referring to all such decisions in the succeeding paragraphs. 27. A part of the demand to the extent of ₹ 95,92,200/- stands confirmed in respect of 3571 bags of Gutkha allegedly cleared by the appellant and transported to M/s. Vijaya Agencies through Verma Roadways during the period 1995-96 and 1996-97. During the course of investigations, Revenue has recorded the statement of one Shri Babu Ram Verma, General Manager of Verma Roadways, Hyderabad. Two statements of Shri Babu Ram Verma were recorded, one on 5-2-1997 and an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kha to M/s. Vijaya Agencies on payment of duty. Otherwise also we find that the documents seized from the premises of Vijaya Agencies are third party documents and cannot be made the sole basis for concluding against the appellant unless, the same stands corroborative by way of independent evidences. As such we agree with the appellant that no reliance can be placed on such uncorroborated evidences procured from the premises of the third party who is the alleged recipient of the goods. 29. Further the Revenue seeking to confirm the huge demand of duty has quantified the same by deriving the number of bags transported to Vijaya Agencies up to Hyderabad from the freight allegedly paid by M/s. Vijaya Agencies to Verma Roadways. M/s. Vijaya Agencies is located at Warangal and there is absolutely no evidence for movement of the goods from Hyderabad to Warangal. It is also seen that the premises of Verma Roadways, when searched, resulted in recovery of Indian Currency of ₹ 1.72 crores which the Revenue has alleged to be the sale proceeds of Madhu Brand Gutkha collected by M/s. Verma Roadways. The ld. Advocate has drawn our attention to the fact that after DGAE officers left the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. Though, the truck numbers were mentioned in the various transportation documents, Revenue has not bothered to record the statement of either the owners of the trucks or the drivers of the trucks. In the dispatch registers of these transporters, only Cotton Katran stands mentioned with various different names of the consigners and no person stands identified by the Revenue for booking of the said consignments and there is no evidence on record to show that said Cotton Katrans were in fact Madhu Brand Gutkha. There is further no identification of the buyers of the goods. There is also no evidence as to whether the appellant had paid any extra freight to Pawan Carrying Corporation for transportation of the clandestinely removed goods. Further, no investigation stand made from the other manufacturers whose names were shown in the transporters register. We fully agree with the appellant that confirmation of demand of duty on the allegation of clandestine removal based upon the third party documents i.e. the transporters, that too not clearly supporting the Revenue s case is neither in accordance with law nor warranted. The representatives of Pawan Carriers have stated that Gutk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, which may not be absolute but must be sufficient to even adopt the theory of preponderance of probabilities. Such evidences could be in the shape of procurement of raw materials, the establishing of actual manufacture of the goods and the clearance of the same as also by identifying the buyers. The same cannot be upheld on the basis of third party documents recovered from either the transporters or railways or from the dealers premises. We find that in the present case the entire case of the Revenue is based upon the uncorroborated documents seized from the third party premises where there is no evidence to establish even the link between the said documents and the appellant. 34. The manufacturer of Gutkha and Pan Masala requires number of raw materials, the major being Supari. Further Katha, Tobacco, cardamom, lime, menthol and perfume are also required to the varying degrees. Except for making allegation of receipt of unaccounted lamination packing material from M/s. Classic Pouches Pvt. Ltd., there is neither any allegation much less any evidence to procurement of other raw materials. Shri Anoop Kumar Sahu was never questioned about the procurement of the raw materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication, the plea of the appellant remains unrebutted. As already noticed in the absence of any link between the documents seized from the third parties premises with the appellant and more so with their manufacturing activity and clearances, the Revenue s confirmation of demand based upon the same cannot be upheld. The same, on a premilinary basis, may lead to some doubts but the said doubts have to be converted to least to preponderance of probabilities so as to establish an adverse case against the assessee, on the basis of the evidence on record. 36. The ld. Advocate appearing for the appellant has also drawn our attention to the fact that another show cause notice dated 13-5-1997 issued to the appellant in respect of the goods seized at various places as also in respect of the final products and the raw materials seized from the appellant s premises was concluded against them by the Adjudicating Authority by relying upon the same set of investigations and the evidences as also the statements recorded during investigation. The order of the Commissioner, being Order No. 58-63/2004, dated 25-10-2004 confirming the demands of duties and ordering confiscation of the currency et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the present case inasmuch as the present demand is also based upon the same set of evidences collected during the investigation, with the only difference that the present case relates to past clearances. 37. We find merits in the above contention. Having already expressed our view that the evidences produced by the Revenue are not sufficient only so as to uphold the allegation of clandestine removal of the goods, our view gets further strengthened by the earlier order of the Tribunal passed in the same appellant s case and based upon the same set of evidences, being Final Order No. A/1114-1116/2005 SM, dated 13-6-2005. 38. After having observed as above, we may now refer to various decisions, relevant on the issue. The Tribunal has already, in the earlier order passed in the case of M/s. Ashwani Co., based upon the same set of investigations has granted them relief on the ground that the evidence adduced by the Revenue was not sufficient enough to conclude against the assessee as regards the clandestine activities. The said order has not been shown to have been appealed against by the Revenue. The same having attained finality, would be of a binding nature. Apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e caused to the appellant for reason of non-production. In the case of Laxman Exports Ltd., the Hon ble Supreme Court observed that denial of cross-examination of raw material supplier results in denial of the appellant s right to contest the veracity of the statement made by the other person and accordingly the Hon ble Supreme Court set aside the majority order of the Tribunal vide which the denial of cross examination was held to be not suffering from any infirmity. 39.1 It is well settled law that clandestine removals cannot be arrived at based upon the confessional statement of other persons or the documents recovered from the third party premises, without corroboration of the said documents. The statements itself are not sufficient for holding so. No presumptions are available in respect of such documents unless they come from the proper custody and such documents raise serious doubts about their genuineness. For the above proposition reference can be made to Bombay High Court decision in the case of Commissioner of Customs, Mumbai v. Foto Centre Trading Co. - 2008 (225) E.L.T. 193 (Bom.); Radhey Shyam Kanoria - 2006 (197) E.L.T. 130 (Tri. - Mum.); Pioneer Industries - 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials in the absence of evidences showing procurement of all the raw materials required for the manufacture of goods alleged to have been clandestinely manufactured and removed. In the present case Revenue has not even alleged procurement of the other raw materials, required for manufacture of such a high quantum of their final product. 40.2 In the case of NU Trend Business Machine Pvt Ltd v. Commissioner of Central Excise, Chennai, 2002 (141) E.L.T. 119 (Tri. - Chennai). It was held that the demand based on the statements of persons who have not turned up for cross-examination, is unsustainable. Such inculpatory statements lose their evidentiary value when the same are not corroborated by Revenue. To the same effect is another decision of the Tribunal in the case of Rawalwasia Ispat Udyog Ltd. - 2005 (186) E.L.T. 465 (Tri. - Del.), laying down that allegations of clandestine removal based upon the statement as also the invoices issued by the informer, cannot be upheld in the absence of cross examination of the deponents of the statements. 41. In fact there are plethora of decisions laying down that the allegations of clandestine removal cannot be based upon the uncorroborat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made the sole basis for confirmation of demand on the clandestine activities and the same are required to be substantiated in material particulars by independent evidences and not on the basis of assumptions and presumptions. The Hon ble Delhi High Court in the case of Commissioner of Income Tax v. Dhingra Works vide their order dated 4-10-2010 has observed that although an admission is extremely important piece of evidence, it cannot be said to be conclusive. The Hon ble Supreme Court in the case of Tukaram S. Dighole has held that the standard of proof required in clandestine allegations is not preponderance of probabilities as in a civil suit but proof beyond reasonable doubt, as required in criminal trial is desired. 44. In view of the foregoing discussions, we held that the Revenue has failed to discharge its burden, so as to come to a finding of clandestine removal. We, accordingly, are of the view that the impugned orders are required to be set aside and appeals allowed. 45. Having independently come to the above finding, we also, at this stage take note of the notesheet orders on the file, which stands produced before us. For better appreciation of the same, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The role of Shri Kapil Dhawan of M/s Classic Pouches Ltd. There appears to be some truth in the party s representation that an attempt is being made to minimize the role played by Shri Kapil Dhawan in assisting. M/s. Ashwani Co. in their attempt to evade duty. This appears to have been brought out even in the note sheet of the DD at page 10/ns. Shri Surendra Kumar Saxena and Shri Jagdish Kumar alias Ashok Kumar employee of Shri Kapil Dhawan stated that the two accounts were operated and opened at the behest of Shri Kapil Dhawan. Investigations need to be made from the banks as to who had issued the drafts in their favour. It was also to be important to find out whether all the drafts issued were in the name of Shri Surinder Kumar and then were endorsed in favour of this Co. there is a statement allegedly taken by the then AD, Anti Evasion, Kanpur of Shri Rajiv Jain dated 14-7-1997 which, apparently not on record though a copy of it has been enclosed by Shri Anoop Sahu in his representation dated 29-9-1999 (refer para 31 page 12 of his representation). I would like JD(DZU) s comments on this aspect. e. Despatch by Rail : Certain attested photocopies have been discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere withheld by the deponents till the proceedings came up before the Commissioner, by which time the damage of not making fuller investigation, thinking that the confessional statements are made and not retracted, was already done. The Revenue Officers have not even cared to investigate into the types of final products manufactured by the appellants despite detailed declarations. 46. As is seen from the above, the statements recorded by the Revenue during the course of investigations, without procuring other evidences, so as to substantiate the investigations, cannot be held to be sufficient evidences to uphold the clandestine removal findings and no adverse opinion can be arrived at, on the basis of the same. The purpose of reproducing the above notesheet notings, on the file of the Revenue, is recorded by the ADG, is only to show that the Revenue was aware of the loopholes in their own case and the ultimate success or failure of the same. The said lapses in the investigation, do not stand removed by the officers, by further doing the investigations and a huge demand of duty cannot be based upon the surmises and conjectures or on the basis of doubts entertained by the officer ..... 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