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TMI Blog2019 (8) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... Factory and of Rs. 2.00 Lakhs each on Shri Ramesh Chandra Khandelwar, Authorized Representative and Shri Uma Shankar Prasad, Proprietor of M/s.J.P. & Sons. Further, as the Adjudicating authority has dropped the demand of Rs. 61,20,408/-, which was based upon procurement of raw material from M/s.Niranjan Tobacco Company, on the ground that the same stands merged with the confirmed demand based upon the records of M/s.Niranjan Tobacco and others. Revenue has also filed appeal against the said part of the order. 2. As per facts on record, M/s.Kishore Zarda Factory is engaged in the manufacture of "Halchal" brand Zarda falling chapter 24 of the first Schedule to the Central Excise Tariff Act, 1985. Their factory was visited by the Central Excise officers on 21 September 2011, who conducted various checks and verifications. Certain records were resumed by the visiting officers under the Panchnama dated 21 September 2011. However, no variation, either in the stock of raw material or final product was detected. 3. As it was gathered that the appellants were selling their final product "Zarda" by railways, a team of the officers of DGCEI visited the inward godown of parcel office, railw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase bill/invoice, the goods totally valued at Rs. 52,800/- were put under seizure. Shri Khandelwal in his statement dated 1 October 2011 deposed that he was engaged in trading of "Halchal" Zarda manufactured by M/s.Kishore Zarda Factory, Varanasi as also Sweet Superi and Ratna Zarda etc.; the goods being received by him were cleared from the factory of M/s.Kishore Zarda Factory with as well as without cover of any documents; that all the purchases made by him are not covered by any bills and wherever bills are issued, the details are noted in the private note pad; that payments for goods received under cover of Bill are made vide cheques and whenever the goods are received without invoices, consideration is paid by cash. Scrutiny of the records maintained by M/s.Khandelwal Surti House led the Revenue to belief that he has received goods involving duty of around Rs. 8.19 Lakhs from M/s.Kishore Zarda without payment of duty. 6. In the above backdrop, the further investigations were conducted by the Revenue and the statements of Shri Chandra Kishore, partner of M/s.Kishore Zarda was recorded on various dates. In his statement, Shri Chandra Kishore disclosed the names of the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premises of M/s.Khandelwal Surti House and to confirm the demand of duty of Rs. 81,96,400/- on the allegation that M/s.Kishore Zarda Factory had cleared the said goods without payment of duty. Notice also proposed imposition of penalties upon various persons. The said show cause notice was adjudicated by the original adjudicating authority confirming the demand, imposing penalties and confiscating the seized goods with an option to appellant to redeem the same. The said order of the original adjudicating authority was challenged by the appellants before Commissioner(Appeals), who vide his Order-in-Appeal No.28,29,30/CE/Alld./2014 dated 31 March 2014 set aside the order of the original adjudicating authority by observing that the onus to prove that the goods found at Sealdah Railway Station were booked by M/s.Kishore Zarda Factory is required to be discharged with affirmative evidence, which the Revenue has failed to do so. The reliance by the Revenue upon the statements of various persons including Shri Priyadarshan Barua and Shri Chandra Kishore, Partner was not appreciated by Commissioner(Appeals) by observing that though the statements recorded during investigation is vital pi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay booking clerk Shri Banwari Chawrasia and his brother Shri Birender Chawrasia and read with the statements of the said persons as also Shri Sanjay Trivedi alias Sanjay Guru. Demands of around Rs. 11.00 Lakhs was sought to be confirmed based upon the records received from premises of M/s.Khandelwal Surti House read with the statements of Shri Ramesh Chandra Khandelwal. Further demand of Rs. 27.00 Lakhs (approx.) was sought to be recovered based upon the records maintained at the transporter's end Shree Shakti Carrier, Guwahati, read with the statements of their representative along with the scrutiny of records maintained by the said transporter and the statements of various authorized representatives of retail stock. The said show cause notice culminated into an order impugned before us passed by the Commissioner confirming the demands as proposed in the notice as also imposing penalties, detailed in the preceding paragraphs. 11. After hearing both sides duly represented by Shri Abhinav Mehrotra, learned Advocate along with Shri Abhisek Panday, learned Advocate and Shri Jitendra Yadav, learned Advocate for the appellants and Shri Gyanendra Kumar Tripathi, learned Authorized Repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st them. 13. We find that in an identical case of M/s.Sugandhi Snuff King the same adjudicating authority had denied the cross-examination of various deponents by adopting the same reasoning. While disposing of the appeals of M/s.Sugandhi Snuff King the Tribunal vide its Final Order No.71268-71273/2019 dated 4 July 2019 observed as under:- "18. We really fail to understand the above reasoning of the adjudicating authority. On one hand, learned Commissioner is accepting that the Revenue's case is based upon the statements of the witnesses and the cross-examination, as per the settled law, should generally be allowed. On the other hand he is disallowing the cross-examination by referring to Supreme Court's decision which is only to the effect that such request should be considered in the light of the facts and circumstances of the each case. The adjudicating authority has not gone further and dealt with the cross-examination request by discussing as to how the said request is not proper, in the facts and circumstances of the case. If the adjudicating authority is not intending to allow the cross-examination, the statements have to be kept out of consideration. He has never deliber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to request the cross-examination so as to test the veracity of the said statements. The adjudicating authority cannot accept the statements on the ground that the same are clear statements and no purpose would be served by allowing the cross-examination. Surprisingly the adjudicating authority has also referred to the jurisdictional Allahabad High Court decision in the case of Govind Mills Ltd. [2013 (294) ELT 369(HC-All.)] and has observed that since in that case there was only one statement relied upon by the Revenue, the Hon'ble High Court held in favour of the assessee. We do not appreciate the above artificial differentiation drawn by the adjudicating authority for the purpose of refusing to allow the cross-examination. A reading of the one liner differentiation in the order leads us to believe that the adjudicating authority was in a hurry to confirm the demands without observing the principles of natural justice Having held that denial of cross-examination has led to violation of principles of natural justice and in such a scenario the statements have to be kept out of consideration, we proceed to decide the other evidences relied upon by the adjudicating authority to arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is well settled law that the third party documents cannot be relied upon for concluding against the assessee unless the same are fully corroborated by sufficient positive and legal evidence. The entries made in the third party records are not conclusive and are primarily based upon the understanding of the person who has made those records. The same stands relatable to M/s.Sugandhi based upon the statements of owners of those records without even identifying and examining the scribe of those entries. Having held that statements are not admissible, the entries are also required to be ignored. As such we find that in the absence of any evidence of actual manufacture of the goods or clearance of the same, the confirmation of demand based upon third parties documents cannot be upheld. 21. .................... 22. At this stage we may refer to certain precedent decisions on the issue of the findings of the clandestine removal based upon the statements of various deponents, who have not been allowed cross-examination read with the entries made in the third party documents recovered from the premises of the said third parties. The Hon'ble Supreme Court in the case of Andaman Timber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ambica International v. Union of India. The Hon'ble High Court held that the provisions of section 9D of the Central Excise Act are required to be scrupulously followed in adjudication proceedings as the same is done in proceedings relating to prosecution. The evidentiary value of the statement, in so far as proving the truth contents thereof is concerned, is completely lost unless and until the case falls within the parameters of section 9D and otherwise it has to be held that adjudicating authority has relied on irrelevant material. If the procedure, which is statutorily prescribed by plenary parliamentary legislation, is not followed, it has to be regarded that the Revenue has given up the said witnesses so that the reliance by the Commissioner on said statement has to be regarded as mis-guided and the statements have to be eschewed from consideration as they would not be relevant for providing the truth of the content thereof. To the same effect is the decision of the Hon'ble Punjab & Haryana High Court in the case of Jindal Drugs Pvt.Ltd. [2016(340) E.L.T. 67 (P & H)]." 15. In fact we also note that the adjudication proceedings relating to the seizure portion of the entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laying down that the legally recognized evidences for establishing the case of clandestine clearance are as under:- "(i) Clandestine manufacturer; (ii) Clandestine/disproportionate/unaccounted purchase, receipt and consumption of raw material and packing material required for manufacturing the alleged quantity of final product clandestinely removed form factory; (iii) freight payment for any such movement; (iv) unauthorized payment for procuring unaccounted raw material and packing material ; (v) disproportionate power consumption, capacity utilization and labour employment; and (vi) recovery of unaccounted sales proceeds in substantial cash from factory or office premises or anywhere else in direct control of assessee, backed by any confirmation, oral or written, from a person giving such cash against goods removed in clandestine manner without payment of duty from the factory." 18. The said principles stand followed by the Tribunal in number of cases. Reference can be made to M/s.S.R. Ingots Pvt.Ltd. v. Commissioner of Central Excise (CESTAT), New Delhi - Final Order No.50750-50751/2018 dated 23 February 2018, Commissioner vs. Kurle Pan Products Pvt.Ltd., Final Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g been made on the basis of doubts and presumptions. After taking into consideration the entire precedent decisions, the Hon'ble High Court observed that there is no abatement made by the department to substantiate the allegation of manufacture of Air-conditioners inasmuch as no evidence has been produced to show that the basic raw material required for manufacturing was procured by the appellant. The ratio of the said decision of the Hon'ble High Court is fully applicable to the facts of the present case. 19. In the present case, as already observed the Revenue's entire case is based upon statements which in turn are as regards explanation of various entries in the records maintained by such deponent. In case of clandestine removal, the goods are first required to be manufactured for which purpose a manufacturer needs lot of raw materials. There is no evidence of procurement of excess raw materials. Admittedly the manufacture of Zarda requires a number of raw materials, the main being raw Zarda. Apart from that Glycerin and other chemicals like Benzyl Burate, Methyl Phenyl Acetate compounds, fragrances and packing materials in dibbies. Apart from alleging the procurement of exces ..... X X X X Extracts X X X X X X X X Extracts X X X X
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