TMI Blog2017 (3) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... vities to store such information. Since, this aspect has not been established; the adjudicating authority has rightly chosen to disregard this piece of evidence. Whenever allegations of clandestine clearances are made, the onus is clearly on the Revenue to establish the clandestine manufacture and clearance of the goods on the basis of tangible and reliable evidence. The onus on the department is even more in the case of units which are under physical control such as the respondent’s factory which is manufacturing cigarettes - Revenue has failed to prove conclusively that the respondent has clandestinely manufactured and removed cigarettes and evaded the Central Excise duty. The evidence marshalled by the Revenue has been proved to be grossly inadequate to discharge the burden of conclusively establishing clandestine clearance. The evidence on record at best raises a doubt in our mind but fails to establish the charge of clandestine clearance. The evidence is proved to be grossly inadequate even by the yardstick of preponderance of probability. Appeal dismissed - decided against Revenue. - E/1935/2008-Ex[DB] - A/52288/2017-CU[DB] - Dated:- 10-3-2017 - Mr. (Dr.) Satish Chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 thousand Nos. and 3015 thousand Nos. respectively in their monthly returns. 1.5 In this regard a statement of Shri Marvin Ali was recorded on 23.8.03 wherein he deposed that since April 2002 he had been working as General Manager, Executive Committee of Reliable Group of Companies and his duties pertained to market development, brand development and collection of data of own brands and competitor brands for analysis. He further stated that such data was provided to him by Shri Riyazuddin Farooqui (Respondent No.4) of M/s Reliable Corporate India Ltd., Bhopal (hereinafter also referred to as M/s RCIL( (RESPONDENT NO.3)) or Respondnet No. 2) who were the sole buyers of cigarettes of Midland and Red Roses brands manufactured by the Respondent No. 1. He conceded that the data present in his laptop represented the actual figures and had been entered by him. 1.6 Shri Marvin Ali deposed that the dispatches of 9929 thousand Midland cigarettes shown in the charts retrieved from his laptop, which were in excess of the clearances declared by M/s RCTIPL(Respondent No.1) in the excise record, had been suppressed by M/s RCTIPL(Respondent No.1) to enable the company to pay less Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the reports, the efficiency of the machines had been noted in percentage and numbers. In this regard a statement of Shri Santosh Singh Thakur, Quality Control Supervisor of the Respondent No. 1 was recorded on 23.8.03. He stated that the production efficiency reports were prepared by the operators and these reports reflected the quantity of cigarettes manufactured per hour. 1.11 Statement of Shri G. S. Ramakrishna, General Manager (Production) of the Respondent No. 1 was also recorded on 23.8.03 wherein he was asked to explain the efficiency reports. Shri Ramakrishna stated that at 100% efficiency the cigarette making machines would make 1400 cigarettes per minute. He further deposed that number 10.3 denoted 100% efficiency. He stated that there was wastage of 12-14% cigarettes during packing. 1.12 On the basis of the Machinewise Efficiency Reports recovered from the factory premises of M/s RCTIPL(Respondent No.1) for the period 1.7.03 to 23.8.03, a worksheet (Annexure43) was prepared showing the total number of cigarettes manufactured during the period. Shri Ramakrishna averred in his statement that the aforesaid worksheet had been correctly prepared and the cigarettes s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, M/s Shalimar Cargo Movers, Bhopal (Respondent No. 5) was recorded on 16.3.04, wherein he deposed that he had been booking goods of M/s RCIL Bhopal(Respondent No. 3) for different stations and such goods were mainly cigarettes. He added that other than cigarettes, M/s RCIL(Respondent No. 3) had also been booking POP, Bandana, Confectionery, packing material etc. He stated that the consignments of cigarettes of M/s RCIL (Respondent No.3), booked through him, had been generally transported to Indore. In case of bookings for other stations, he had transported the cigarettes upto M/s Sewa Roadways, Indore who had further arranged onward transportation through their channel. 1.18 Shri Prateek Kalra (Respondent No. 5) deposed that in respect of the goods booked with them, they prepare a bilty (CR) in which details of quantity, description of goods, weight, consignor, consignee and freight are mentioned. The bilty is prepared in three copies: consignor, consignee and driver copy. They also prepare a challan and freight memo in respect of the consignments. 1.19 He deposed that the goods were booked by M/s RCIL (Respondent No.3) on the basis of delivery challans or invoices of M/s R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters of M/s Sewa Roadways, the consignments pertained to cigarettes booked by M/s RCIL (Respondent No.3) under bills. 1.24 The remaining consignments of Annexure 25, (other than those included in Annexure 71) had been booked by M/s RCIL (Respondent No. 3) on the basis of kachchi parchis. In respect of most of these consignments, in the delivery/unloading registers of M/s Sewa Roadways the description of the goods had been shown as cigarettes . But, as stated above even in some of the cases where the description of goods has been shown as bags in the delivery/unloading registers, duty paid cigarettes had been transported by the Respondent No. 1. Applying the same analogy to the goods booked by M/s RCIL (Respondent No.3)) on the basis of kachchi parchis and shown as bags C/R etc. in the delivery/unloading registers, it appeared that cigarettes had been transported by M/s Shalimar Cargo Movers, Bhopal (Respondent No.5). In respect of those challans included in Annexure 25 under which goods other than cigarettes, such as advertising material had been transported, the same has been mentioned against the description of the goods in the delivery/unloading registers. 1.25 Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uddin Farooqui (Respondent No.4) was shown the statement dated 23.8.03 given by Shri Marvin Ali, wherein he had accepted that M/s RCTIPL(Respondent No.1) had cleared non-duty paid cigarettes. Shri Farooqui was also shown the printouts retrieved from the laptop of Shri Marvin Ali in which the figures of Midland and Red Roses cigarettes sold during the months of April 2003 to June 2003 had been shown, Shri Farooqui stated that these figures pertained to dispatches of cigarettes from M/s RCTIPL(Respondent No.1) to M/ RCIL (Respondent No. 3) and had been provided by him to Shri Marvin Ali. He further confirmed that the contents of the statement dated 23.8.03 of Shri Marvin Ali were true. 1.30 Another statement of Shri Riyazuddin Farooqui (Respondent No.4) was recorded on 4.8.04 under section 14 of the Central Excise Act, 1944. In this statement Shri Farooqui stated that he is director of M/s RCIL( (Respondent No.3)) since year 2002 and the other director of the Company is Shri Hakim Akhtar Alam, Bhopal. He stated that M/s RCIL (Respondent NO.3)) is mainly engaged in trading of Midland brand cigarettes for which there is an agreement between M/s RCIL (Respondent No.3)) and M/s RCTIPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oqui (Respondent No. 4) did not produce the details of cigarettes booked on the basis of kachchi parchis, he was summoned on 2.11.04 and his statement was recorded under Section 14 of the Central Excise Act, 1944. Shri Farooqui stated that the consignments of cigarettes booked on the basis of kachchi parchis were received by them from M/s RCTIPL(Respondent No.1), Mandideep. No bills or invoices were received by them for these consignments from M/s RCTIPL(Respondent No.1). Such consignments were booked for transportation under the oral directions of Shri Marvin Ali of M/s RCTIPL(Respondent No.1). 1.36 Shri Farooqui deposed that the CFCs (corrugated cartons) of cigarettes received by them from M/s RCTIPL(Respondent No.1) under excise invoice were further packed by them in bags (2 CFCs per bag). However, the CFCs of cigarettes received from M/s RCTIPL(Respondent No.1) without cover of invoice were not packed by them in bags. He further deposed that M/s Shalimar Cargo Movers charged the same freight for one bag of cigarettes (containing 2 CFCs) booked on the basis of invoice as that charged for one CFC booked on the basis of kachchi parchis. Thus Shri Farooqui corroborated the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CNs revealed that GCN No. 25688 dated 9.8.03 was in respect invoice No. 267 and GCN No. 25694 dated 19.8.03 was for invoice No. 296 of M/s HFL Ltd. Under each of these GCNs (Driver s copy), 37 bags of filter rods were shown to have been received by the same person at M/s RCTPIL. As the name of the consignee in the drivers copy of GCN No. 25688 had been shown as M/s RCTI and the goods of both the GCNs 25688 and 25694 have been received by the same person at M/s RCTI, the receipt of the filter rods covered under the said two GCNs at the factory of the Respondent No. 1 could not be disputed. This is also supported by the statement of the transporter Shri Yusuf Shaikh. However, the Consignor s Copy of GCN No. 25688 present in the files of M/s HFL indicated the Consignee as M/s Surya Trading Co., Jabalpur while the Driver Copy of the same GCN recovered from transporter showed Consignee as RCTI . 1.41 The officers of DGCEI noticed that in Bilty No. 59256 dated 12.07.03 of M/s Khandelwal Transport Corporation, which was found in the seized files of M/s HFL, the name of the consignee M/s Western Tobacco Ltd., Mandideep was scored out and M/s Surya Trading Co. was written as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mandideep. He (Shri Satish Kumar Jam) requested Shri Manohar Jam to correct the name of consignee in respect of 19 cartons as M/s Surya Trading Co. and issue another consignment note for 104 cartons in favour of M/s WTL. He, however, added that since there was no request from M/s Surya Trading Co. for shifting 19 cartons from Mandideep, they did not bother about those 19 cartons. 1.45 Verification of the address of M/s Surya Trading Co., Jabalpur was got done through the Deputy Commissioner, Central Excise, Division, Jabalpur. The Deputy Commissioner, Central Excise, Jabalpur, vide his letter C.No. IV(6)4/P/ 2002/12949 dated 27.8.03, informed that there had been no firm of the name and style of M/s Surya Trading Co., at 401, Near Shitla Mata Mandir, Ghamapur, Jabalpur, which was the address given in invoices of M/s HFL. It transpired that the said address was a residential address occupied by one Shri Abhishek Shrivastava, who was having an electrical shop, since last 40 years. 1.46 The scrutiny of records of M/s HFL revealed that for purchasing filter rods in the name of M/s Surya Trading Co., the payments had been invariably made through Demand Drafts issued from different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.50 As no further information was provided by Shri Sikandar Hafiz Khan(Respondent No.2) as promised in his statement dated 9.9.03, summons dated 10.8.04, 2.3.05, 23.3.05, 20.4.05, 27.4.05 and 6.5,05 were issued to Shri Sikandar Hafiz Khan(Respondent No.2) by the officers of DGCEI. Shri Sikandar Hafiz Khan(Respondent No.2), however, did not cooperate with the investigation at any time. He avoided giving statement and did not honour the several summons issued to him. As Shri Khan did not turn up, a complaint was filed before the Hon ble Economic Offences Court, Indore. Against order of the Economic Offences Court, Shri Khan filed a WP before the Hon ble High Court of MP and obtained a stay order. As the case was pending for more than 3 years, the officers of DGCEI visited Shri Khan s office at Bhopal on 18.8.06 and recorded his statement under Section 14 of the Central Excise Act, 1944. In this statement Shri Khan only reiterated that all the clearances form M/s RCTIPL(Respondent No.1) were done on payment of duty and under proper documents. 1.51 It appeared that the entire modus operandi was within the knowledge of Shri Sikandar Hafiz Khan(Respondent No.2), CMD of the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s RCIL( (Respondent NO.3)) or M/s RCTIPL(Respondent No.1) was available evidencing duty payment on the same. These consignments were booked for transportation by M/s RCIL( (Respondent NO.3)) on the basis of kachchi parchis. The total Central Excise duty which appeared to have been evaded by the Respondent No. 1 on these 7016 cartons of Midland cigarettes amounted to ₹ 4,70,07,200/-. 1.56 From the data retrieved from the laptop of Shri Marvin Ali, General Manager of the Respondent No. 1, it appeared that the following quantities of Midland and Red Roses brands cigarettes were cleared by the Respondent No. 1 without payment of the Central Excise duty leviable thereon during the period April 2003 to June 2003: Quantity Duty payable Midland Cigarettes 9929000 No. ₹ 66,52,430/- (ii) Red Roses Cigarettes 3015000 No. ₹ 4,07,025/- 1.57 Thus it appeared that during the period November 2001 to June 2003 the Respondent No. 1 had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e like this by the Departmental officers. I was threatened of dire consequences if I do not say as stated by the officers. I was informed that I would not be targeted if I cooperated with them. Shri Marvin Ali informed that he had received a notice dated 10.8.06 from M/s Reliable Cigarettes Tobacco Industries Pvt. Ltd. asking for damages caused to them due to the statements given by him before the Central Excise authorities. He then filed an affidavit before the Court of Additional Judicial Magistrate, Bhopal stating that his statement had been recorded by the officers under threat. In this regard he produced copy of order dated 7.5.07 of the Third Additional Judicial Magistrate, Class-I, Bhopal wherein it has been held that the notice dated 10.8.06 given by the Respondent No. 1 to Shri Marvin Ali is not enforceable. 1.61 Shri G. S. Ramakrishna, General Manager (Production) of the Respondent No. 1 was cross-examined before the adjudicating authority on 17.3.08. He was asked whether a machine making filter cigarettes can be used to manufacture plain cigarettes. He stated that the filter cigarette making machine viz, machine No. 1 can be used to make plain cigarettes by making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as he had been threatened that if he retracted the statements the officers would take by force similar statements and keep him under confinement. Therefore he was waiting for an opportunity where he could bring out the correct facts supported by documents. 1.65 Shri Farooqui, further narrated that the items transported by M/s Shalimar Cargo Movers on kackchi parchis were not cigarettes manufactured by RCTI but were publicity materials such as POP (Point of Purchase) advertisement materials, danglers, posters, stickers, bardana, confectionary etc. belonging to one M/s. R. S. Company at 77, A B, SDA Annexe, Dewas Naka, Indore (M.P.). 1.66 Shri Farooqui stated that this company used to deal in manufacturing of gutka, pan masala etc. One M/s. Chitra Sales, Bhopal who were doing the printing work for M/s R. S. Company, Indore used to approach his (Riyazuddin Farooqui s) proprietorship firm namely M/s. Overview Accounts and Management Consultants, New Taj Market, Bhopal operating from the same address as that of M/s RCIL(Respondent No.3), for transportation of POP advertisement material, posters, etc. to M/s. R. S. Company, Indore. He would then engage M/s. Shalimar Cargo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free cigarettes to distribute as promotional materials. 1.72 Shri Vijay Kalra of M/s Sewa Roadways, Indore was cross- examined before the adjudicating authority on 28.4.08. Shri Vijay Kalra stated that the description of goods has been mentioned as cigarettes in their delivery/ unloading registers on the basis of bilties of M/s Shalimar Cargo Movers, Bhopal. Shri Vijay Kalra was asked to explain how in certain cases the description of goods has been entered as cigarettes in his registers when the description of the goods was not mentioned in the challans/bilties of M/s Shalimar Cargo Movers. He stated that the goods came in plain gunny bags and since they did not open the packs to find out the goods being carried under the consignment notes, there was no way of knowing what the consignment was. He stated that since many consignments with consignor RCIL( Respondent No.3)) and consignee Shiv Supari were all cigarettes they have mistakenly entered cigarettes in their registers. He further stated that the goods were handed over to whoever brought the consignee copy of the bilty. 1.73 Shri Prateek Kalra(Respondent No. 5) of M/s Shalimar Cargo Movers, Bhopal was also cross-exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods had been given as bags. The Department has treated the number of bags to be the number of CFCs of cigarettes and demanded duty. However, the contents in a bag could never be known to the transporter and consignor was not inclined to state what was contained in the bags. Obviously there has been assumption that whatever has originated from Reliable, RCIL( Respondent NO.3) etc. is also cigarettes which is incorrect. It was only a guess made by M/s Shalimar Cargo Movers that there were CFCs of cigarettes in the gunny bags. 1.80 They submitted that the Challans recovered from the premises of M/s. Shalimar Cargo Movers, Bhopal do not conclusively prove that they have indeed transported cigarettes clandestinely without payment of central excise duty. Challans recovered from M/s Shalimar Cargo Movers do not provide any description of goods. The unloading registers and delivery registers of M/s Sewa Roadways, Indore were prepared from these very challans and therefore, they cannot be treated as corroborative evidence. Since there was no description in the challans of Shalimar Cargo Movers, there was no occasion for M/s Sewa Transport to write cigarettes in their register. 1.81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Filter Rod 13845.1264 M 4. Alu. Foil 712.28 Bob 5. BOPP Film 1773.44 Kgs 6. TOR 183 rolls 7. Shell 8310 M 8. Slide 8310 M 9. Gaywrapper 332.41 M 10. CFC 6922.56 Nos. 11. Masking Tape 332 Kgs. 12. Fevicol Max 1121.9 Kgs. 13. Fevicol PPA 332 Kgs. 14. Ramacol Ghg. 207.76 Kgs. 15. Cut Tobacco 57465 Kgs. Thus, the Respondent No. 1 submitted that the show cause notice was wholly unsustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the officers of DGCEI. Further on the same day in the simultaneous search at their head office, office of RCIL( Respondent NO.3), transporters and dealers no unaccounted cigarettes were found/seized. Unaccounted cash was also not recovered from any place of search. For clandestine manufacture of cigarettes, raw material required (tobacco, shells slides, packing material etc.) was also not found in excess or short than the recorded balance. Further during search of alleged consignee Shiv Supari Stores, Indore on 23.08.2006 also neither non duty paid cigarettes nor any unaccounted cash could be recovered or seized by the investigating Officers. 1.89 The Commissioner has therefore held that there is force in M/s RCTI s submission that the challans recovered from M/s Shalimar cargo Movers, Bhopal do not conclusively prove that they have transported cigarettes clandestinely without payment of Central Excise Duty. 1.90 The Commissioner has observed that during cross examination Shri Prateek Kalra(Respondent No. 5) has held that the statement dated 16.3.04 was recorded by force. He has observed that POP advertising material having no commercial value was received by them in kac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Cigarette is under physical control and one Inspector was posted round the clock there to supervise not only the clearances but entire activities right from the procurement of raw materials to manufacturing of cigarettes and clearances thereof. All the clearances of cigarettes from the factory are made under physical supervision of the Departmental officers and after obtaining their clearance certificate on the clearance documents. It is therefore, not possible for any assessee to remove any goods clandestinely from their factory under physical control without the connivance of the Departmental officers posted therein. There is no allegation of any collusion of the Departmental officers with M/s RCTI. Further, the Commissioner has held that five-hour time during which the Inspector posted at RCTI might have supervised clearances of M/s WTL, is not sufficient to bring inside the factory all the raw materials required to manufacture cigarettes to be removed clandestinely, process them, manufacture cigarettes, pack them and remove the same clandestinely. 1.95 The Commissioner has held that huge quantities of other raw material were also required for manufacture of the cigarett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored by the ld. Commissioner since after the initial statement, in the further statements recorded from Shri Marvin Ali. He had consistently affirmed the fact of clearance of cigarettes clandestinely. The Revenue submitted that Shri Marvin Ali s original statement should be taken as true and correct and the belated retraction made under the influence of M/s Reliable Cigarettes and Tobacco Industries should have been ignored. (ii) Show cause notice has alleged higher production than what has been recorded and allegation of clandestine clearance has been raised on the basis of shiftwise machine efficiency reports recovered during the search for pertaining to the months of July and August, 2003. These reveal higher production of Midland cigarettes than the recorded production of the respondent. This fact has also been confirmed by Shri G.S. Ramakrishan, General Manager (Production). However, these records have not been given credence by the ld. Commissioner citing the reason that Shri G.S. Ramakrishna at the time of cross examination has virtually retracted his earlier statements. Revenue has claimed that the explanation given by Shri Ramakrishna at the time of cross examination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order, Revenue is in appeal before us. 7. We discuss below the issues one by one: (i) Revenue has alleged clandestine clearances of cigarette during the period April, 2003 to June 2003. The quantification of the demand has been made on the basis of the computer printout taken from the computer of Shri Marvin Ali who was the General Manager of the respondent s factory at the relevant time. Though these figures were originally admitted by Shri Ali as pertaining to clandestine clearances, his statement has been retracted subsequently. During the course of examination by the adjudicating authority, he has categorically asserted that all the statements were recorded from him under duress with the threat of arrest. Commissioner has taken the view that no credence can be given to such retracted statement of Shri Ali. Such retraction also has been made by Shri Ali before the civil court, Bhopal. It has also been submitted by the respondent that the computer printout does not satisfy the terms of Section 36B of the Central Excise Act. Section14 of the Central Excise Act empowers the departmental officers to record the statement of witnesses which are formally admissible as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been cleared clandestinely. In the cross-examination, it was explained that machines were capable of being used interchangeably for filter as well as non filter cigarettes. It was explained that while the production of Midland cigarette may be lower, the same has been compensated by actually producing more non filter cigarettes. Thus, the adjudicating authority has concluded that on one hand Midland Filter Cigarettes have been produced less, but the same was compensated by production of more non filter cigarettes. In our view the adjudicating authority has dealt with the efficiency reports in a convincing manner and the findings on this ground cannot be disputed. 9. Another ground for alleging clandestine removal is that some consignments of filter rods consigned M/s Surya Trading, were delivered at the factory of the respondent. These filter rods were manufactured by M/s Hind Filters and the supplier has admitted, during cross examination that they have not received any payments for the filter rods stated to have been delivered to the respondent s factory. Even as per the documentary proof available with the department, out of eight consignments, six consignments wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture and removal of cigarettes against M/s RCTI does not sustain on merits. Hon ble CESTAT in the case of CCE Vs. Universal Industries [2001 (130) ELT 228 (T)] has held that the charge of clandestine removal cannot be made n the basis of preponderance of probabilities. It must be proved on the basis of sufficient and tangible evidence. This judgement of the Hon ble CESTAT has also been upheld by the Hon ble Supreme Court [2003 (157) ELT A315 (SC)]. 28.43 The foregoing discussions lead to the only conclusion that there was no clandestine removal in this case to summaries that there was no clandestine removal stands established from the following facts: * There was no recovery of any documents pertaining to alleged clandestine removal from the factory of the noticees. * There was no evidence of production and clearance of cigarettes clandestinely without payment of duty. * No buyer of such clandestinely produced cigarettes has been identified. * There was no evidence of procurement of corresponding quantity of raw materials viz. purchase of tobacco, chemicals, cigarette paper, packing material etc. * There was no discrepancy found in regard to man ..... X X X X Extracts X X X X X X X X Extracts X X X X
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