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M/s Durga Trading Company Versus Commissioner of Central Excise & S.T., Lucknow and others

Clandestine removal of goods - manufacture of Pan Masala and Gutkha - Held that: - the contentions of Revenue in the grounds of appeal are more or less repetition of show cause notice. We find that the show cause notice and earlier Order-in-Original dated 27.05.2005, have merged into the final order dated 12.08.2011 passed by this Tribunal, as per the doctrine of merger. The issue for our consideration is present appeals before us is whether the impugned order in original is sustainable with ref .....

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ble in respect of all the above stated appeals. Therefore, all the above stated appeals are dismissed. - Appeal No. E/55665, 55705, 55706, 55707, 55711 and 55712/2013-EX[DB] - ORDER NO.70721-70726/2016 - Dated:- 8-8-2016 - MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) AND MR. ANIL G. SHAKKARWAR MEMBER (TECHNICAL) Shri Rajiv Ranjan, Jt. Commissioner (AR) for the Revenue Shri Bipin Garg and Shri Amit Awasthi for the assessee ORDER Per Mr. Anil G. Shakkarwar: The S e five appeals, bearing Nos.E/55705/2013, .....

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s of the case are that M/s Durga Trading Company (hereinafter referred to as DTC), 14, Datia Houser K, Colony, Khurshed Bagh, Lucknow was engaged in the manufacturing of Pan Masata & Gutkha under the Brand name Pukar'. Most of the finished goods of DTC are sold to various dealers either directly by DTC or through the traders, namely, M/s Udaj Traders (UT, for brevity) and M/s ROPI Products (RP, for brevity), Shri Udai Chaurasia was the Proprietor of M/s Udai Traders. Smt. Asha Chaurasia .....

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ading firm, engaged in similar activities as that of M/s U, T. Shri Raj Kumar Chaurasia was the proprietor of M/s RIP. Products. Both these trading firms, had same set of dealers, who were getting their supply of Pan Masala & Gutkha from DTC. 2.1 M/s Kashi Laminators (P) Ltd., (KL, for brevity)/ Khadra, Daliganj, Opposite Shia College, Sitapur Road, Lucknow was engaged in the manufacture of Plastic Products, DTC was the main customer of K.L. 2.2 M/s New Shashi Zarda Bhandar was a dealer of D .....

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of U. T. / R.P., factory of KL & others premises including the residential premises of relevant persons etc, were searched on 18-03.2004 by the officers of Central Excise Intelligence (DGCEI). 2.4 At the factory premises of DTC, the officers took the stock of raw material & finished goods in the presence of Shri Ashish Srivastava & following alleged discrepancies were noticed. (i). 915.84 Kgs. Of 53 bags of Gutkha & 48.6 kgs, i.e. 3 bags of Pan Masala was found short over the cor .....

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Pukar brand was received by his firm UT on from DTC without accounting for the same in their proper books of accounts. The said 120 bags of Gutkha were detected by the officers at various other premises. Further, it also came to the notice of the officers that another consignment of 40 bags was removed from the factory of DTC without accountal in their books of accounts as said consignments were also traced by the officers at different premises. Cash amounting to (Rupees Thirteen lakhs eighteen .....

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rly the officers searched the trading premises of M/s R.P. Products and seized cash amounting to 2.8 The Godown of R.P. was also searched on 18.03.2004, A huge stock of supari, Katha, Lime Tobacco, Cardamom etc. valuing more than 80 lakhs, was available there. The officers resumed one pocket diary & one pen drive/thumb drive for further investigation. 2.9 The officers searched the residential premises of Shri Pushkar Chaurasi, Shri Raj Kumar Chaurasia & Shri Pankaj' Chaurasia and sei .....

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officers searched the premises of various transporters & dealers, engaged in the transportation of finished goods manufacture by DTC and noticed- S.N. Name of the Company (M/s) Result of seizure 1. Narayan Transport Co., Gorakhpur(Transporter) Challans issued by M.s Narayan Transport & forwarding, Agency, Lucknow. Unloading report of M/s Narayan transport, Freight Carrier, Deoria. 2. New Malik Transport Co., Lucknow (Transporter) 40 bags of Pukar Gutkha. GR s supported by cash/credit mem .....

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y and other co-noticee were issued with a show cause notice No.DZU/INV/31/2004/1728 dated 16.09.2004, directing M/s Durga Trading Company to show cause as to why Central Excise Duty amounting to ₹ 5,18,16,960/- should not be demanded for removing 17992 bags of Pukar Gutkha without accounting of the same and certain other proposals as far as:- 3.1 M/s Durga Trading Co. / Lucknow was required to show cause as to why:- (i) The Central Excise duty amounting to ₹ 5,18,16,960/- should not .....

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Transport on 18.03.2004) should not be demanded. As this amount has already been deposited why this should not D k- appropriated against the above demand. (iv) Central Excise duty amounting to ₹ 1,05,030/- should not be demanded towards the finished goods seized at the premises of UT on 18.03.2004. (v) Central Excise duty amounting to ₹ 44,465/- should not be demanded towards the shortage of finished goods noticed in the factory of DTC on the day of search. (vi) Following seized Puk .....

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lued at ₹ 14,400/- seized on 21.07.2004 at M/s Chaurasia Traders, Tulsipur. Duty on these goods has been covered in demand at Point No.(i) above. (vii) Cash amounting to ₹ 13,18,000/- seized from the factory cum residential premises i.e. 14, Datia House, Lucknow should not be confiscated. (viii) Interest should also not be charged. (ix) Penalty should not be imposed. 3.2 Further, M/s Udai Traders, Lucknow and M/s R P Products, Lucknow (Noticee No. 2 & 3) were asked to show cause .....

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g to ₹ 6,85,000/- seized from the residence cum business premises on 18.3.2004 should not be confiscated. (ii) Penalty should not be imposed on them under Rule 26 of the Central Excise Rules, 2002. 3.4 Shri Ashish Srivastav was called upon to show cause as to why penalty should not be imposed on him. 4. The said show cause notice was adjudicated through Order-in-Original No.19/Commr/LKO/2005 dated 27.05.2005, wherein the Original Authority has held as follows:- (a) Confirmed duty of ₹ .....

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premises of M/s New Malik Transport. This amount has already been deposited therefore he ordered to appropriate the same. (d) Confirmed duty of ₹ 1,05,030/- against M/s Durga Trading Co., Lucknow on the goods seized at the premises of M/s UT. (e) Imposed penalty of ₹ 5,23,82790/- against M/s Durga Trading Co., Lucknow. (f) Ordered for recovery of interest on the above duty. (g) dropped duty amounting to ₹ 44,865/- as the shortage at M/s DTC is not proved, (h) dropped the confi .....

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cash amounting to ₹ 13,18,000/- seized from the factory cum residential premises i.e. 14, Datia House, Lucknow. (k) ordered confiscation of cash amounting to Rsa10,61,000/- seized from business of M/s R.P. Products, Lucknow. (I) ordered confiscation of cash amounting to ₹ 2,93,000/- seized from residence of Shri Pankaj Chaurasia, Lucknow. (m) ordered confiscation of cash amounting to ₹ 10,03,000/- and ₹ 3,70,000/- seized from residence of Shri Raj Kumar Chaurasia and Shri .....

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manded the matter for consideration thereof afresh, inter-alia observing as under:- (i). No proper investigation was made on the point of duplicity of product though adjudicating authority (A/A) has himself held that similar product with similar brand name was manufactured in Nepal and available in India. Further, the party has filed nine FIRS regarding duplicity of their product. (ii). Some of the documents relate to the products which are not manufactured by the Party and yet they were include .....

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gister. A/A erred in holding that this defence was not given by the Party during search and it was given for the first time during reply of SCN only. (vi). The excess quantity of Supari and Kattha was not weighed at the time of raid and it was concluded on mere assumption. A/A is not proper in holding that such objection was not raised by the Party at the time of raid. It is necessary for A/A to ascertain from the analysis of all material on records whether the same establishes correctness of th .....

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arriving at the number of pouches that could have been manufactured from a certain quantity of packing material. Further, the clandestine removal of such pouches was also concluded on the same basis. (ix). A/A is not proper in concluding that recovery of nine slips has sufficiently proved possibility of taking finished goods for the purpose of evasion by clearing unaccounted finished goods. In-fact, unless credibility of the slips is established by properly analyizing the materials it cannot be .....

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g activity by the Party unless there is any analysis of material to establish the link. (xi). As regards the supply of 18602.35 Kg of Laminated Plastic Rolls by M/s Kashi Laminators to M/s DTC, it was held by A/A on the basis of some slips, issued in the name of "Sanjai Kumar, LKO" and recovered from residential premise of the father of MD of M/S Kashi Laminators, that same were issued for M/s DTC and the name "Sanjai Kumar, LKO" was the code name given to M/s DTC as stated b .....

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no attempt on the part of A/A to ascertain its link with the proceeds of the goods alleged to have been clandestinely removed. The link cannot be established on mere assumption and there must be some material on record which is to be ascertained by analyzing the same. (xiv). The correct course for the A/A would be to test the correctness of the statements of transporters and dealers stating that it is M/s DTC M/s Udai Traders who were arranging the transport to ascertain whether the words " .....

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entral Excise duty of ₹ 39,08,160.00 (Rupees Thirty nine lacs eight thousands one hundred sixty only) under sub Section (i) of Section 11A of the Central Excise Act/ 1944 for removing 1357 bags of excisable goods/ Pukar Gutkha' without payment of Central Excise Duty against M/s Durga Trading Co., Lucknow. (ii). The central excise duty of ₹ 39,08,160.00 (Rupees Thirty nine Iacs eight thousands one hundred sixty only) was ordered to be recovered under Section 11A(I) of the Central .....

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of Gutkha seized at the premises of M/s New Mallik Transport under Section 11A of the Central Excise Act, 1944B This amount has already been deposited therefore he ordered to appropriate the same. (iv). He dropped the proposal for demand of duty of ₹ 1,05,030/- (Rs. One lacs Five thousand and thirty only) against M/s Durga Trading Co,, Lucknow on the goods seized at the premises of M/s UT under the sub-section 1 of Section 11A of the Central Excise 1944. (v). He imposed penalty of ₹ .....

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o ₹ 44,865/- (Rs. Forty Four Thousand Eight Hundred and Sixty five only) on account of shortage at M/s DTC. (viii). He dropped the proposal to confiscate goods seized at 67/ Sri Ram road, Lucknow, M/s New Shashi Zarda Bhandar, Raebareli, M/s Rastogi General Store, Allahabad and M/s Chaurasia Traders, Tulsipur. (ix). He ordered release of ₹ 6,85,000/- (Rs. Six Lacs Eighty five thousands only) seized from M/s New Shashi Zarda Bhandar, Raebareily and did not impose any penalty on M/s Ne .....

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Section 121 of Customs Act as made applicable to Central Excise Act. (xii). He ordered release of cash amounting to ₹ 2,93,000/- (Rs. Two Lacs Ninety Three thousands only) seized from residence of Shri Pankaj Chaurasia, Lucknow under Section 121 of Customs Act as made applicable to Central Excise Act. (xiii). He ordered release of cash amounting to ₹ 10,03,000/- (Rs. Ten Lacs Three thousands only) and ₹ 3,70,000/- (Rs. Three Iacs Seventy Thousand only) seized from residence of .....

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Original dated In 1.11.2012, Commissioner of Central Excise, Lucknow, as filed above said appeals on the grounds as follows:- (a) While dealing with the facts of the case and dropping the major portion of duty demanded of Rs,5,18,16,960/- on the basis of transporters documents, the findings of Adjudicating Authority are neither legal not proper in as much as he has simply drawn the inferences in favour of the noticees without considering that the transporters and other persons have already state .....

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d and as such it was difficult to indicate, as to which brand of goods were being transported. (iii). Some of the transporters had also confirmed that they were also transporting gutkha of various other brands. (iv). Some of the transporters have already stated that Mr. Udai Chand Chaurasia of M/s Udai Traders never came to their transport company for booking the consignment and whenever the goods were received in their transport company. The said person asserted that they had no contractual rel .....

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bstantiated in the SCN that the whole manner of manufacturing and clearance was clandestine in nature. The transporters in their earlier statements have also corroborated the allegations. Further, the transporters have never retracted their statements on their own and it was only on the cross-examination, made several years later, during second adjudication that they have denied their earlier statements. The fact of not retracting their statements on their own establishes that the retraction by .....

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, the proper manner of cross-examination was to make the transporters etc. to simultaneously face the Party's counsel on the one side and the Departmental Counsel/ Investigating Officers on the other side. However, in the instant case no such opportunity was given to Department/Investigating Officers to Cross-examine the transporters. It is observed that there is overwhelming categorical evidence where the facts have been admitted and the retractions are belated and baseless after-thought ma .....

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as under:- Q. No. 09- Please go through said challan wherein Zarda Gutkha is mentioned under the column contents. What do you mean by Zarda Gutkha and who has manufactured such goods? Ans.- Zarda Gutkha means Gutkha pouch which was manufactured by D TC under the brand Pukar, Such goods were received under the credit/debit memo of UT. In view of the above, his later submissions i.e. during cross examination are an afterthought made belatedly after eight year. (ii). Statement dated 02.04.2004 of .....

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ransport & Forwarding Agency, Lucknow of his statement dated 15.03.2004 is belated afterthought. (iii). It is observed from points (iv) and (vii) of para 9.3 of O-I-O regarding cross-examination dated 01.11.2012 of Shri Vivek Gupta, Prop. of M/S Lucknow Allahabad Forwarding Agency, that he did not deny his statement dated 27.05.2004 (Q/A No. 26) that the rickshaw Trolly of Pukar Chhap Gutkha was booked by M/s UT at Lucknow (iv). At point No.(vii) he confirmed having stated that transportatio .....

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a Traders, Lucknow, are Pukar Gutkha. (v). All these statements and facts have also been corroborated by enquiries at the end of dealers and other persons mentioned in the Show cause notice. (c) Further, the adjudicating authority has wrongly relied upon the statement of Shri Udal Chaurasia (which was also an afterthought), that he used to put his Brand Name on all the goods supplied. When Shri Chaurasia himself was an accused in the case who acted clandestinely in non-accountal and clandestine .....

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ion. The seizure of 10.61 lakh cash was not explained on the spot and remained unexplained even after 4 months of seizure. Regarding cash amounting to ₹ 10.03 lakhs seized from the residence of Shri Raj Kumar Chaurasia. He in his statement dated 11.08.2004 admitted that an amount of ₹ 5.03 lakhs was received for unaccounted sale of finished goods manufactured by DTC and unaccounted sale of raw materials. Seizure of the unaccounted finished goods at the various premises of traders on .....

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DTC clearly shows that all the said parties e.g. DTC, UT etc. were involved together in the unaccounted clearance of such goods for evasion of Central Excise Duty. (d) More so, the evidence are overwhelming in the form of statements, slips, challans and clandestine modus-operandi of fraudulent preparation of transport documents, clandestinely sending through rikshwa pullers and clandestine transaction in cash payments and evidence of machines of production, seizure of non-duty paid goods. Theref .....

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he adjudicating authority has without any reason or proper basis dropped the charges and confiscation of cash. (e) Further, the adjudicating authority has wrongly dropped the demand on the presumption without any basis that the other bags on which Pukar Brand was not written were duty paid. The standard of proof required in quasi-judicial proceedings is that of preponderance of probability" and it is not beyond reasonable doubt" as has been wrongly held by the adjudicating authority. I .....

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ance of legal duties to the State. Secrecy and stealth being its covering guards, it is impossible for investigation to un-reveal every link of the process. As held by Hon'ble Supreme Court in case of Collector of Customs, Madras & others Vs. D. Bhoormull [1983(13)ELT 1546 (SC)] the Department is not required to prove its case with mathematical precision, but what is required is the establishment of such degree of probability that a prudent man may on its basis believe in the existence o .....

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one line in the operative portion of O-I-O stating that no penalty is imposed upon him, Since the CESTAT Order quashes the first adjudication order hence while undertaking the second adjudication all eight parties were supposed to be addressed with proper discussion. 8. In appeal None/ 55665/2013/ the appellant, M/s Durga Trading Company, filed appeal, challenging the findings of Original Authority in Order-in-Original dated 01.11.2012, the grounds of appeal, inter-alia include findings by the O .....

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ue has reiterated the grounds of appeal in the appeals filed by the Commissioner of Central Excise, Lucknow and he has contested the appeal preferred by M/s Durga Trading Company. The Ld. Counsel representing M/s Durga Trading Company has submitted that the following facts are undisputed in these proceedings (i) both M/s Durga Trading Company and M/s Udai Traders are separate legal juristic persons. (ii) Clearance of Pukar Brand Gutkha at ex-factory gate of the manufacturer, is not disputed. (ii .....

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