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2019 (11) TMI 305

..... charges of clandestine removal are based on third party documents and based on the oral statements who were not cross-examined - HELD THAT:- Since the said cross examinations were not conducted, the basis for conclusion of total quantity of Gutkha alleged to be clandestinely cleared has not been established. Further, wherever Zarda, Masala and Shyam Bahar was stated in the GRs and lorry challans the same was clandestinely removed Shyam Bahar Gutkha without payment of duty by the appellant has also not been established because the cross examination of the representatives of transporters was not allowed. We, therefore, hold that the clandestine manufacture and clearance of alleged quantity of gutkha is not established. The seized currency of about ₹ 4.38 crores cannot be held to be sale proceeds of clandestinely removed gutkha - the demand of Central Excise duty of about ₹ 7.17 crore is not sustainable - the confiscation of currency of ₹ 4.38 crores approximate is not sustainable - therefore, penalties are also not imposable & interest is not recoverable. Appeal allowed - decided in favor of appellant. - Excise Appeal No.70121 of 2019-[DB] - FINAL ORDER NO-71846 .....

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..... ation. There was further proposal to confiscate currency of ₹ 4,38,80,530/- under the provisions of Customs Act made applicable to Central Excise as sale proceeds of clandestinely removed goods. Through the said show cause notice other noticees were also called upon to show cause, as to why penalties should not be imposed on them. The said show cause notice was adjudicated through Order-in-Original No.10/Commr/LKO/2006-07 dated 23.03.2007 passed by Commissioner of Central Excise, Lucknow. Through the said order, the demand was confirmed and the seized currency of around ₹ 4.38 crores was confiscated. Other noticees of the said show cause notice were imposed with penalties. The present appellant and other five co-appellants preferred the appeals against the said order dated 23.03.2007 before this Tribunal. The said six appeals were disposed of through a common Final Order No.769-774/2011-EX dated 12.08.2011. It was submitted before this Tribunal that the entire case was based on some details regarding booking of consignments in the records of 3 transport companies i.e. M/s Sitapur-Kanpur Transport Company (SKTC), M/s Haji Transport Goods Carrier (HTGC) and M/s Narain Tra .....

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..... this Tribunal on behalf of the appellant that the major portion of duty demanded is based on the testimony of the said 25 persons and not permitting their cross examination vitiated the entire proceedings and in that regard the appellant had relied on the judgment of Hon ble Allahabad High Court in the case of Commissioner of Central Excise, Meerut-I Vs M/s Permarth Iron Pvt. Ltd. reported at 2010 (260) ELT 514 (All.). This Tribunal through the said Final Order dated 12.08.2011 has observed as follows:- 7.4 In this case, the Appellant vide their letter dated 5-2-2006 to the Commissioner had sought cross examination of 25 persons which included Shri Praveen Rastogi, Partner, M/s. SKTC, Shri Anjani Kumar Shukla, employee of M/s. SKTC, Shri Mithlesh Kumar of M/s. HTGC, Shri Dhirendra Shukla of M/s. DG, the concerned person of SIIR, New Delhi and some traders - Shri Mahesh Chaurasia of M/s. Shanker Traders, Lakhimpur and Shri Shiv Kumar Jaiswal of M/s. Jaiswal Stores, Sitapur. However, perusal of the impugned order does not indicate that their cross examination has been allowed. The request for cross examination has been rejected on the ground that the person sought to be cross examine .....

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..... al Laboratory (CRCL). 7.5 In view of the above discussion, the order confirming duty demand against M/s. ST and imposing penalty on them under Section 11AC has to be set aside and the matter has to be remanded to the adjudicating authority for de novo adjudication after permitting the cross objection of Proprietors/Partners and employees of transport companies, Shri Dhirendra Shukla of M/s. DG, Chemical Examiners of SIIR and of any other witnesses whose statements have been relied upon by the adjudicating authority and their cross examination has been requested by the Appellant giving justification for the same, and also as mentioned above, getting a fresh sample of gutka from the seized goods, if still available, tested through CRCL and taking that test report also into account after permitting the cross examination of the Chemical Examiner; if requested. If, however, the witnesses whose statements have been recorded under Section 14 of the Central Excise Act, 1944 by a Gazetted Officer and the same are relied upon by the Department, and due to the circumstances enumerated in Section 9D(l)(a), their cross-examination is not possible, in terms of the provisions of Section 9D(i) rea .....

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..... s of Section 34 of the Central Excise Act, 1944, an option to redeem the same on payment of redemption fine would have to be given. 9. In view of our above discussions - (a) the duty demand against M/s. ST along with interest and the penalty on them under Section 11AC is set aside and the matter is remanded to the Commissioner for de novo adjudication keeping in view our observations in para 7.5 of this order; (b) Penalty under Rule 26 of the Central Excise Rules, 2002 on M/s. SKTC, confiscation of Indian currency of ₹ 4,38,80,530/- seized from the residential-cum-factory premises of Shri Sanjiv Mishra and confiscation of 85008 pouches of gutka seized from factory premises of M/s. ST for non-accountal and penalty on them on this count is set aside and the matter is remanded to Commissioner for de novo adjudication keeping in view our observation in para-8 of this order; (c) confiscation of supari seized from M/s. DG and penalty on M/s. ST under Rule 25 for non-accountal of supari and penalty under Rule 26 of Central Excise Rules, 2002 on Shri Dhirendra Shukla, Proprietor, M/s. DG is set aside; and (d) Penalty under Rule 26 of the Central Excise Rules, 2002 on M/s. SVOL, Shri .....

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..... peal. 7. Once the position of law is settled and a contrary view is not put forth by learned counsel for the appellant in the present case, we are of the considered opinion that the judgment rendered by the Appellate Tribunal does not suffer from any illegality which may call for an interference under the appellate jurisdiction of this Court by virtue of Section 35G of the Central Excise Act, 1944. 8. In the result, the appeal fails and the impugned order passed by the Appellate Tribunal is hereby confirmed. It is open to the parties to appear before the adjudicating authority who shall proceed in accordance with law. 9. With the aforesaid observations, the appeal is dismissed. 4. The impugned order was passed as a consequence of the said directions through the order dated 12.08.2011 passed by this Tribunal merged in the order dated 21.01.2016 passed by Hon ble Allahabad High Court. The relevant parts of the finding of impugned order are reproduced bellow:- 6.1 I have carefully gone through the Show Cause Notice dated 20.10.2004, Order-In-Original dated 15.02.2007, the observations and findings of the Hon ble Tribunal in their order dated 12.08.2011 and the order of the Hon ble Hig .....

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..... nd pass the order in the light of facts, evidences and submissions already on record and complying with the directions of the Hon ble Tribunal. I proceed accordingly. The Original Adjudicating Authority through the impugned order confirmed the demand of Central Excise duty of ₹ 7,17,16,580/- and appropriated the amount of ₹ 55,60,612/-. Further, equal penalty was imposed on the appellant. The seized cash of ₹ 4,38,80,530/- was confiscated by the Original Adjudicating Authority. Aggrieved by the said order, appellant is before this Tribunal. 5. Heard Shri Anurag Mishra and Ms Pragya Pandey both learned Advocates on behalf of the appellant. They made following submissions:- a) The present remand proceedings were under the directions that the appellant will be provided the opportunity to cross-examine the proprietors, partners and employees of transport companies, Shri Dharmendra Shukla of Ms Dharmendra Grinding, Chemical Examiner of SIIR. It was also provided that the cross-examination of any other witness shall also be provided if their statements were relied upon by the department and the request in this regard has been made by the appellant. Therefore, it is appa .....

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..... held that opportunity of personal hearing has been given to all the 6 appellants who approached the Appellate Tribunal against the order of the Commissioner dated 15.02.2007. As a matter fact the Appellate Tribunal has already dropped the proceedings against 4 of the appellants namely M/s Shyam Vanaspati Oil, Shri Sanjiv Mishra and Shri Devendra Shukla. The denovo proceedings were only in respect of M/s Shyam Traders and M/s Sitapur Kanpur Transport Company. The Act of the learned Commissioner clearly proves that the learned Commissioner has failed to appreciate the order of the Appellate Tribunal and Hon ble Allahabad High Court. More importantly the learned Commissioner has admitted the fact that the letters of personal hearing were sent through Speed Post which were returned back with different remarks by the postal authorities.. The learned Commissioner has not made any other effort to serve the letter to the appellant especially when the case was remanded back with a specific direction. The learned Commissioner has also failed to appreciate that the appellant was not required to give any request for cross-examination in respect of the persons whose cross-examination has alrea .....

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..... n be relied upon by following the mandate as provided in the case of M/s Jindal Drugs Pvt. Ltd. Vs U.O.I. reported at 2016 (340) ELT 67 (P & H), M/s G-Tech Industries Vs Union of India report at 2016 (339) ELT 209. The learned Commissioner has not given any consideration to the said specific direction and the statements were not testified by doing cross examination in chief which has to be done. The learned Commissioner has made a grave mistake by reiterating the submission and the findings made by the earlier Commissioner in his order dated 15.02.2007 which was set aside by the Hon ble Triubnal. g) In the present case the charges of clandestine removal were based on third party documents and on the statements which were recorded at the back of the appellant. The said statements were not only contrary; but based on incorrect facts. The appellant in their earlier submission requested for the cross examination because the statements were obtained under pressure and duress and based on incorrect facts. The said submissions were appreciated by the Appellate Tribunal and the appellant were allowed for cross examination of such witnesses. The learned Commissioner has not conceded wit .....

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..... be confiscated as sale proceeds. The confiscation of seized currency which was the share capital of some other company is liable to be set aside and the said seized currency should be returned back to the appellant along with interest thereon. The currency was seized in the year 2003 and was lying with the department since then and the department is enjoying the benefits of the said seized currency. The said currency ought to be returned back to the appellant along with interest from the date of its seizure till the date of return. j) It is further submitted that the entire demand is based on third party document i.e. transport receipt and GR s. In view of the cited precedents the charges of clandestine removal cannot be based solely upon oral statements and third party documents. The other corroborative evidences in the form of consumption of raw material, transportation of raw material, its actual use in the manufacturing of goods, production capacity, extra labour force, extra consumption of electricity and evidence of removal of finished goods from the factory of the assessee and the receipt of payment has to be adduced to prove the charges of clandestine removal. In the presen .....

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..... d Final Order dated 12.08.2011, judgment dated 21.01.2016 passed by Hon ble Allahabad High Court and case records, we note that as directed by Hon ble Allahabad High Court it was responsibility of the Original Adjudicating Authority i.e. Commissioner to insure that the 25 persons whose cross examination was sought through the letter dated 05.02.2006 were presented for cross examination by the appellant. The said requirement was dealt with by the Original Adjudicating Authority through para 6.2 of the impugned Order-in-Original wherein he has sent a letter dated 22.11.2016 to 6 appellants and informed them that the case was posted for hearing on 08.12.2016. The impugned order does not indicate that the Original Adjudicating Authority has put in any efforts to present 25 prosecution witnesses before the appellants for cross examination. We, therefore, hold that directions of the Hon ble Allahabad High Court through their judgment dated 21.01.2016 were not followed by the Original Adjudicating Authority. It was clearly observed in the said Final Order dated 12.08.2011 that the cross examination of partners and employees of M/s SKTC, M/s HTGC & M/s NTFC which was the transport comp .....

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