TMI Blog2019 (3) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... said agency were Gutkha and not Zarda, which was being written in the GRs/invoices - also, such bookings at the Transport Agency were being done by M/s HMC and not by SC or SFF. As such, even if the statement of Shri Indra Bahadhur Singh is accepted to be true, the same would relate to M/s HMC, who was not the manufacturer of Gutka and can no way reflect upon the clearances from SC or SFF. The Revenue has further relied upon the statements of some of the buyers and the discrepancy of the stock at their premises found as a result of searches. However, as we have earlier observed that the entire production manufactured by the appellant was being sold by them to M/s.HMC who was doing trading in various products including the tobacco and Zarda. Though it is well settled law that the statements of the third parties cannot be made the basis for arriving at the conclusion of clandestine removal, without corroborative evidence, but even if presuming that the said statements were correct, it is the HMC who has sold the goods in cash to the buyers - The Revenue is expected to produce evidences showing the manufacture of goods by SC and SFF and its further clearances to HMC in a clandestin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. E/2082/2009-EX[DB] Rajesh Kumar Gupta, Prop.M/s. Himachal Marketing Co. V. CCE, Lucknow Nil Rs.59,400/- Order-in-Original No. 02/Commissioner/LKO/CX/2009 Dt. 30/01/2009 Sr. No. Appeal No. Parties Names Duty Penalty 1. E/1289/2009-EX[DB] Shimla Food Flavours v. CCE, Lucknow Rs.45,27,103/- Rs.45,27,103/- 2. E/1290/2009-EX[DB] Shimla Chemicals v. CCE, Lucknow Rs.72,76,500 Rs.72,76,500- 3. E/1004/2009-EX[DB] Aanchal Polypack v. CCE, Lucknow Nil Rs.1,18,03,603/- 4. E/1291/2009-EX[DB] Rajesh Kumar Gupta, Prop.M/s.Himachal Marketing Co. V. CCE, Lucknow Nil Rs.1,18,03,603/- 5. E/1292/2009-EX[DB] Shimla Products V. CCE, Lucknow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n pouches. 3. On 01.06.2004, the factory premises of SC/SFF, office cum godown premises of HMC, factory premises of SP, premises of M/s.Aanchal Polypack and the premises of one M/s.Lucknow Tulsipur Forwarding Agency, Lucknow, transporter and the premises of some dealers purchasing Gutkha were searched by the officers of Directorate General of Central Excise Intelligence. It is seen that during the search in the official premises of HMC, one van loaded with 22 bags of Gutkha was found to be parked near the said premises. On asking, the Central Excise documents in respect of the said 22 bags could not be produced by HMC. Therefore, the same was seized under a reasonable belief that the goods loaded in the premises have been cleared without payment of duty. Further on search of the premises of the said noticee, 35 rolls of packaging material was found near the main gate of the factory premises. The authorized signatory of the said noticee explained that the said rolls stand received by them on the same day itself from M/s.Aanchal Polypack under the cover of a challan dated 01.06.2004 and have yet to be entered in the records. However, on contact with the officers searching the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to impose penalties upon the various noticees. The said show cause notice stands confirmed by the Order-in-Original No. 01/Commissioner/LKO/CX/2009 Dt. 27/01/2009 by the Commissioner vide which he ordered for confiscation of the various materials seized initially with an option to the assessee to redeem the same on payment of redemption fine. Duties also stand confirmed along with imposition of penalties. The Indian currency of ₹ 4.00 Lakhs also stand confiscated. Appeal No.E/1815/2009-EX[DB], E/1816/2009-EX[DB], E/1850/2009-EX[DB], E/2082/2009-EX[DB] stand filed against the said order of the Commissioner. 5. In the above background further investigations were taken up by the Revenue. During the further investigations, statements of various persons including the appellants buyers and the representative of the transporter agency were recorded. Shri Indra Bahadur Singh, Booking Clerk, working in transport agency M/s.Lucknow Tulsipur Forwarding Agency deposed that even though description of the goods on the G.R./Challanas issued by their agency was Zarda, but actually Gomti brand Gutkha was booked by one Shri Yadav. Statements of consignment agents of the transporter Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,18,03,603/- each in terms of the provisions of Rule 25/26 of the Central Excise Rules. The Appeal Nos.E/1289/2009-EX[DB], E/1290/2009-EX[DB], E/1004/2009-EX[DB], E/1291/2009-EX[DB], E/1292/2009-EX[DB], E/1293/2009-EX[DB], E/1317/2009-EX[DB] stand filed by the appellants against the said order. As the two sets of appeals arises from two different orders, one relating to seizure part and the other relating to demands of duties alleging clandestine activities, we proceed to decide the two sets of appeals as under. O-I-O No.01/Commissioner/LKO/CX/2009 7. Shri S.K. Pandey, learned Advocate, Shri A.P. Mathur, learned Advocate Shri Amit Awasthi, learned Advocate appearing for the Appellants have contested the impugned orders on number of grounds. It is the contention of the learned Advocate Shri S.K. Pandey that the impugned orders are factually incorrect inasmuch as in the seizure case the adjudicating authority has confirmed the demand of duty in respect of the 22 bags found loaded in the pick up van, which was located outside the premises of M/s. Himachal Marketing Company. Admittedly the said unit is not the manufacturing unit. In fact the goods manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vily on the Revenue and is required to be discharged by production of sufficient evidence. In the present case there is nothing on record to substantiate the Revenue s allegations of the currency being the sale proceeds. As such we find no justification for confiscation of the same. Accordingly, the confiscation of the same is set aside. As regards the confiscation of 416.017 kgs. of printed laminated pouches with an option to M/s.Aanchal Polypack to redeem the same on payment of redemption fine of ₹ 58,242.00, we find that during the relevant period, the said appellant was working under small scale exemption as also in terms of the Hon ble Supreme Court decision in the case of M/s Metlex (I) Pvt. Ltd. V/s Commissioner of Central Excise, New Delhi reported as 2004 (165) E.L.T. 129 (S.C.) the activity of lamination does not amount to manufacture and as such M/s Aanchal Polypack was not clearing their goods on payment of duty. In these circumstances, it cannot be said that they cleared their goods in a clandestine manner, in the absence of any duty liability upon them there was no duty liability against the said appellant, thus justifying confiscation of the said goods. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actured by the said two manufacturers. He submits that no reliance can be placed on the said statement of Shri Indra Bahadur Singh, inasmuch has he was never offered for cross-examination, neither the other deponents were cross-examined during the course of adjudication. By referring to various decisions, he submits that denial of cross-examination amounts to violation of principles of natural justice and the reliance on the said uncorroborated and unexamined statements cannot be justifiably done. He submits that the said statement of Shri Indra Bahadur Singh is based upon the version of Shri Yadav, who used to bring the goods to the transporters for booking the same. As such even the version of Shri Indra Bahadur Singh is based upon hearsay evidence and not on his personal knowledge. He submits that inasmuch as the goods were sent to the said transporters in a packed condition, the statement of Shri Indra Bahadur Singh to the effect that the goods booked were Gutkha and not Zarda cannot be appreciated inasmuch as he would not be knowing the contents of the packets, which were not opened by him. Shri Panday, learned Advocate further submits that HMC was also trading in tobacco and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Supari. He submits that at times Supari was purchased through him for which he was getting commission from the seller of the Supari and payments for the same were being made to the seller of the Supari directly and not to Shri Sunil Kr. Sahu. As such his statement that he had sold Supari to the said two manufacturing units cannot be relied upon in view of the clear fact that he was only a broker and not seller of Supari. Further the adjudicating authority has upheld the allegations that during the period August, 2003 to January, 2004 Shimla Chemicals has procured unaccounted Supari from Shimla Products. The said allegation is made only on the basis of statement of Shri Santosh Kr.Trivedi, an employee of Shimla Products. According to the said statement some quantity of Supari was dispatched to Shimla Chemicals and rest was used for manufacture of sweet Supari. There is no quantification given by Shri Trivedi as regards the quantity of Supari supplied to SFF and SC. There is also no evidence of transport of Supari by Shimla Products to the factory of SFF and SC and as such reliance by the adjudicating authority on the uncorroborated statement of employee of M/s.Shimla Products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the statements of the buyers do not reflect the correct position. By drawing out attention to the outcome of the search of various premises of the buyers he submits that the same were selling many brands of Gutkha including tobacco and in some of the cases no difference in stock was found. Further the statements of the buyers will not lead to inevitable conclusion that the Gutkha found at the said buyer s premises were cleared clandestinely by the said two manufacturers. He also submits that neither the sale records of HMC were scrutinized or adduced in the show cause notice to support the department s claim to the effect that the impugned goods were sold in excess of the purchases made by HMC from SFF or SC. He submits that as per the settled law the onus to prove clandestine activities of the manufacturers is on the Revenue and is required to be discharged by tangible, cogent evidences of removal and such findings of clandestine removal cannot be upheld on the basis of the third party records or the statements, there being no corroborative evidences. For the above proposition he has relied upon various decisions of the Tribunal as detailed below:- (1) Grauer Weil (India) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir product without payment of duty. He also submits that the fact of interception of the vehicle found loaded with 22 bags of Gutkha further strengthens the Revenue s case. Accordingly he prays for upholding the impugn4ed orders and rejecting the appeals. 18. After carefully considering the submissions made by both the sides, we find that as per undisputed facts on record, Gomti brand Gutkha was owned by M/s.HMC which is a proprietory unit of one Shri Rajesh Kr.Gupta. The said owner of the brand name was getting the goods manufactured from Shimla Food and Flavours as also from Shimla Chemicals and was buying their entire production himself. He was further selling the goods to various customers either directly from their premises, in which case the customers were booking the goods through the transporters on their own or the said goods were being booked by M/s.HMC through M/s.Lucknow Tulsipur Forwarding Agency for which various GRs/Challans were being issued by the said agency. Shri Indra Bahadur Singh, Booking Clerk of said transport agency, in his statement deposed that the goods booked through them were actually Gutkha whereas Zarda was being shown in the GRs/Challans. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on even in the show cause notice that SFF/SC has ever booked any goods directly through Lucknow Tulsipur Forwarding Agency or even sold goods directly to customers it has to be held that the entire case of the Revenue is based upon assumptions and presumptions. 20. It is further seen that the Revenue has made out its case based upon the statement of the various persons including the statement of various representatives of the transport agency, the statement of the commission agent for sale of Supari and statement of buyers etc. The appellants had made a request for cross-examining the deponent of the said statement which has not be granted by the Adjudicating Authority. Though some of the statement stand retracted by the deponents but the same had been relied upon by the Adjudicating Authority. The Hon ble Allahabad High Court in the case of Commissioner of Central Excise V/s Parmarth Iron Pvt. Ltd. reported as 2010 (260) E.L.T. 514 (All.) has observed that the statements recorded during the course of investigation are required to meet the requirements of Section 9D of the Central Excise Act. If the said statement have not been tested on the tool of cross-examination, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is virtually no evidence on record to indicate the clandestine activities of the two manufacturers.. 22. We also find favour with the said manufacturer s plea that for manufacture of Gutkha various raw materials are required. The Revenue has only referred to uncorroborated statement of one Shri Sahu, who was a dealer in Supari and statement of one Shri Tripathi to upheld that the appellant had procured excess Supari which was not being reflected by them in their records. Apart from the fact that the said statements have not been tested by the tool of cross-examination and are in the nature of a third party statements and cannot be solely relied upon, we note that the Revenue has not advanced any evidence for procurement of the other raw materials. Admittedly manufacture of Gutkha involves and requires number of raw materials and in the absence of any allegation of procurement of excess raw materials of all the varieties, mere reference to Supari procurements by itself would not be sufficient to uphold the findings of clandestine removal. 23. Though the legal issue that clandestine removal is to be arrived at on the basis of positive evidences and the Revenue is und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst various assessees of manufacturers of Gutkha without connecting the GRs with the goods manufactured by the particular assessee on the basis of particulars of goods stated in the GRs. It was also noticed by the Tribunal in the impugned order that there was no investigation conducted about procurement of raw material of allegedly clandestinely cleared goods. The Tribunal has also come to the conclusion that there is no question of clandestine removal of goods without payment of duty. Moreover the bilties/GRs which were recovered from the transporter, M/s Vinod Forwarding Agency and were lying with the Revenue were being used for issuing show cause notice without conducting any investigation. In view of the aforesaid finding of facts recorded by the Tribunal we do not find any infirmity in the impugned order. The present appeal lacks merit and is hereby dismissed. The questions of law are answered accordingly in favour of the respondent assessee and against the Department We find that the evidences available in the present case as also in the said decision of the Tribunal in the case of Kurele Fragrances Pvt. Ltd. are of the same nature and as such the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidences of clandestine manufacture and clearance and nor 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) statement of buyers with some details of lillicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of pro ..... 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