TMI Blog2023 (9) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the officers. They don't write the Panchnama as alleged by the counsel of the appellant. When the officers go for a search based on some specific intelligence, they may not get panch witnesses in the early hours. So, to save time and for ensuring smooth conduct of the search proceedings, sometimes the officers take panch witnesses along with them. There is no violation of the provisions of section 100(4) of the Cr.PC in this. The Appellant has not questioned the credentials of the panch witnesses. Just because they have been taken from a distant place, the panchnama proceedings will not be vitiated. Hence, the objection raised by the Appellant in this regard is rejected. The case of the Revenue is mainly based on the statements recorded from Shri Ajay Kumar, Sri Bishnu Charan Ghadei and Shri Ratikanta Ghadei and Shri Jhasaketan Bhoi, on 02.08.2010 and subsequently. However, it is observed that all the above persons have retracted their statement by sworn affidavits on 04.08.2010, which were submitted to the department on 01.08.2011. The adjudicating authority has rejected these sworn Affidavits on the ground they were filed as an afterthought. The Appellant st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the adjudicating authority. The adjudicating authority has not given any proper reason for rejecting their request for cross examination. Cross examination is all the more required when the statements stand retracted. In view of the above, the statements recorded in this case cannot be relied upon to confirm the demands as the procedure set out in Section 9D has not been followed. Whether the evidences available on record indicate that four packing machines installed in the unregistered premises were in working condition and used for manufacturing of Chewing Tobacco? - HELD THAT:- Four packing machines were found in the unregistered premises on the date of search on 02.08.2010. The contention of the Appellant is that all the four packing machines were damaged and not in operative condition. The machines were not installed. The machines were having stand and wheel for movement and they were not attached with the Earth. There was no evidence of usage of the packing machines, but the officers arranged them in such a manner as if those were being used in the manufacture and packing of Chewing Tobacco - Merely because there have been four inoperative defective machines lying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) TMI 57 - CESTAT NEW DELHI] where it was held that these evidences, the admissibility of which itself is legally not sustainable, cannot be the basis for confirmation of duty on the goods allegedly manufactured and cleared by the appellant. The investigation in the present case has been very sketchy and will not support the findings in the impugned order. Thus, the provisions of Rule 18(2) cannot be invoked in this case to demand duty for the period from April 2010 to August 2010. Accordingly, the answer is in the negative. Whether penalty under Rule 18(1) of the CTPM Rules read with Section 11 AC of the Central Excise Act, 1944, imposable in this case? - HELD THAT:- Penalty is imposable under Rule 18 read with Section 11AC of the Central Excise Act, 1944, when it is established that Chewing Tobacco was produces and clandestinely removed. In view of the above findings, it is already held that the investigation has not established manufacture and clandestine clearance of Chewing Tobacco. Hence, the penalty provisions cited above are not applicable in this case. Accordingly, the penalty imposed on the Appellant is liable to be set aside. Hence, the answer is in the negati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken, who stated that four machines were installed but he did not maintain the record of production and sale of Chewing Tobacco manufactured by use of those two machines. The statement of Shri Bishnu Charan Gharai was taken, who in his statement dated 02.08.2010, stated that two machines were running and remaining two machines were not running. He also disclosed about the purchase of the machines. The seizure memo was given to him and he was made the custodian of the seized goods. On 24.09.2010, a joint stock verification was conducted and some seized goods (packed chewing tobacco) were found missing. The Proprietor disclosed that the said goods have been sold to prevent further spoiling. On 10.11.2010, the seized goods were released provisionally on execution of Bond and Security Deposit. 3. The Appellant was issued with a Show Cause Notice dated 25.01.2011, demanding Central Excise duty amounting to Rs.285 Lacs, along with interest and penalty. It was proposed to appropriate Rs.25 Lacs already paid by them during investigation. It was also proposed for confiscation of the seized goods. The demand has been raised on the ground that packing machines were installed in the unregi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The search witnesses were brought by officers only with a view to make out a case .The Panchnama was not written by them. The Appellant wanted to cross-examine them, but it was not allowed. The Sarpanch of the Gram Panchayat was present at the time of search, but his statement was not taken. (iv) Shri Ajay Kumar, Sri Bishnu Charan Ghadei and Shri Ratikanta Ghadei and Shri Jhasaketan Bhoi retracted their statement on 04.08.2010. The Appellant stated that the retracted statements cannot be relied upon to demand duty. Regarding reliability of retracted statements in the adjudication proceedings, they cited the decision of the Hon'ble Delhi High Court in the case of CCE Vs Vishnu and Co. Ltd., reported in 2016 (332) ELT 796 (Del), wherein it has been held that once it is shown that the maker of such statement has resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. (v) The statement of Shri Ajay Kumar, Shri Bishnu Charan Gede and Shri Rathi Kanta Gede were taken in English and they were not allowed to write their statements in Oriya. (vi) The procedure as mandated under Section 9D of the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f two machines in the manufacturing process, duty has been rightly demanded as per Rule 18(2) of the CTPM Rules,2010. Hence, he prayed for dismissing the appeal. 6. Heard both sides and perused the appeal records. 7. Before going into the merits of the issue we need to answer certain preliminary objections raised by the Appellant regarding the procedure followed during the course of the search on 02.08.2010. The Ld. Counsel for the Appellant contended that the Panchnama has not been drawn properly, since the Panchas were not the independent witnesses. They cannot come from 56 Km. away from their residence to the place of seizure at 5:30 A.M. They were not the local and independent witnesses. It was contrary to the sub-section 4 of the Section 100 of Cr. P.C. The search witnesses were brought by officers only with a view to make out a case .The Panchnama was not written by them. Accordingly, they contended that the entire Panchanama proceedings are vitiated. We observe that the adjudicating authority has given a finding on this preliminary objection raised in the impugned order, which is reproduced below: 5.14 In order to substantiate their argument that the Panchanaa dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search proceedings carried out by the officers. They don't write the Panchnama as alleged by the counsel of the appellant. When the officers go for a search based on some specific intelligence, they may not get panch witnesses in the early hours. So, to save time and for ensuring smooth conduct of the search proceedings, sometimes the officers take panch witnesses along with them. There is no violation of the provisions of section 100(4) of the Cr.PC in this. The Appellant has not questioned the credentials of the panch witnesses. Just because they have been taken from a distant place, the panchnama proceedings will not be vitiated. Hence, we reject the objection raised by the Appellant in this regard. 9. We observe that it is a case where duty has been demanded as per Rule 18(2) of the CTPM Rules, 2010. The said Rule provides for demanding duty on deemed basis on certain circumstances. For ready reference, the said Rule is reproduced below: 9.1. Rule 18(2) of the Rules provides that:- if it is found that goods have been manufactured in or cleared from a unit which is not registered with the jurisdictional Central Excise Office, then, the duty liability of such u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manufacturing of Chewing Tobacco (Khaini) and M/s Jaga Kalia Snax and Mixure are engaged in trading of Chewing Tobacco. He stated that the said packing machines available in the unregistered premised were purchased in the year 2008, in the name of M/s. Jaga Kalia Snax and Mixure. They were not in working condition and hence dumped in a corner of the premises. All the four machines were not installed. The machines were having stand and wheel for movement and they were not attached with the Earth. There was no evidence of usage of the packing machines, but the officers arranged them in such a manner as if those were being used in the manufacture and packing of Chewing Tobacco. They rejected the contention of the investigation that pouches have been attached with the machines and they were used in the manufacturing of Chewing Tobacco. There was no raw material available for manufacturing of Chewing Tobacco in the premises. The investigating officers only seized some rejected material which are not fit for human consumption. Some pouches seized were manufactured by the two machines available in the registered premises before their sealing in March 2010. Merely because there hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of their argument that the statements cannot be relied upon as evidence, when the procedure set out in Section 9D of the Central Excise Act, 1944 are not followed. 12. We find merit in the contention of the appellant. The statements were written in English. Their request for giving the statements in Odiya should have been considered by the investigation officers. The workers available on the date of search contended in their sworn Affidavit dated 04.08.210 that they were not knowing the contents of the statements and were compelled to sign the statements. Even though the retraction was done in the sworn affidavits before the Notary immediately after giving the statements they were submitted to the department later 01.08.2011. We agree with the contention of the Appellant that late submission does not mean that they agree with the contents statements. Even if the retractions were submitted to the department later, they remain as retracted statements only. We agree with the contention of the Appellant that the retracted statements have no evidentiary value in the absence of any corroborative evidence. We also find that the procedure set out in Section 9D has not been fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of the certain sales (date-wise) commencing from 1-4-2005. The delivery challans for various chemicals for the month of December, 2005 and January, 2006 were found and seized during the search. The appellants disowned the contents of the printout and stated that it has manipulated the data base with motive, to take revenge from the partner and the firm for the refusal of the loan of Rs. 1 lakh sought by the Computer Operator. The appellant filed an affidavit disclosing this fact on 13-2-2006 i.e. immediately after the raid and a copy of the affidavit was also given to the investigating officer. The Central Excise officers attempted to corroborate the contents of the printout with the statements of 30 persons viz. buyers, transporters etc. The appellants requested for cross-examination of 30 persons which was rejected by the Adjudicating authority. The appellants contended that the statements are pre-drafted computer statements and it cannot be voluntary nature. After considering the submissions of the appellant, the Commissioner (Appeals) allowed the cross-examination of 4 persons randomly selected. Three of them stated that they were made to sign the pre-drafted statements on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be followed as mandated under Section 9D, the Hon ble Punjab and Haryana High Court in the case of G-Tech Industries, reported in 2016(339) ELT 209 (P H), held as under: 3. The petitioner seeks, by means of the present writ petition, to challenge Order-in-Original No. V(29)15/ce/Commr.Adj/Chd-II/44/2015, dated 4-4-2016 issued by respondent No. 2 whereby respondent No. 2 has confirmed differential Central Excise Duty (hereinafter referred to as duty ) demand of Rs. 7,08,38,008/- with interest and equivalent penalty. It is contended that the impugned order-in-original has been passed in flagrant violation of Section 9D of the Central Excise Act, 1944 (hereinafter referred to as the Act ) by relying upon the statements recorded under Section 14 of the Act without first admitting them in evidence in accordance with the procedure prescribed in this regard by Section 9D(1)(b) of the Act. 4. In view of the fact that the case of the petitioner is essentially premised on Section 9D of the Central Excise Act, 1944, it would be appropriate to reproduce the said provision, in extenso, thus : 9D. Relevancy of statements under certain circumstances. - (1) A statement made and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances are absent, the statement, which has been made during inquiry/investigation, before a Gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a Gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1). 9. The consequence would be that, in the absence of the circumstances specified in Section 9D(1), if the adjudicating authority relies on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such reliance would, therefore, be vitiated in law and on facts. 10. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e admitted in evidence in the interests of justice. 14. There is no justification for jettisoning this procedure, statutorily prescribed by plenary parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word shall in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory. 15. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the Gazetted Central Excise officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof. 20. Reliance may also usefully be placed on Para 16 of the judgment of the Allahabad High Court in C.C.E. v. Parmarth Iron Pvt Ltd., 2010 (260) E.L.T. 514 (All.), which, too, unequivocally expound the law thus : If the Revenue choose (sic chose?) not to examine any witnesses in adjudication, their statements cannot be considered as evidence. 21. That adjudicating authorities are bound by the general principles of evidence, stands affirmed in the judgment of the Supreme Court in C.C. v. Bussa Overseas Properties Ltd., 2007 (216) E.L.T. 659 (S.C.), which upheld the decision of the Tribunal in Bussa Overseas Properties Ltd. v. C.C., 2001 (137) E.L.T. 637 (T). 22. It is clear, from a reading of the Order-in-Original dated 4-4-2016 supra, that Respondents No. 2 has, in the said Orders-in-Original, placed extensive reliance on the statements, recorded during investigation under Section 14 of the Act. He has not invoked clause (a) of sub-section (1) of Section 9D of the Act, by holding that attendance of the makers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a copy thereof is made available to the assessee, it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, should it choose to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well- settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without allowing the assessee an opportunity to test the said evidence by cross- examining the makers of the said statements. If at all authority is required for this proposition, reference may be made to the decisions of the Hon ble Supreme Court in Arya Abhushan Bhandar v. U.O.I., 2002 (143) E.L.T. 25 (S.C.) and Swadeshi Polytex v. Collector, 2000 (122) E.L.T. 641 (S.C.). 25. The writ petition is allowed in the aforesaid terms. 12.5. In the case of Hi Tech Abrasives, it has been held that the provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not mere directory. Therefore, unless the substantive provisions contained in Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case before the Court and the Court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. The provisions of sub-section (1) shall, so (2) far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before the Court. On scanning the anatomy of the said provision, we find that the statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of inquiry or proceeding under the Act shall be relevant for the purposes of proving truth of the facts which it contains only when it fulfills the conditions prescribed in clause (a) or as the case may be, under clause (b). While clause (a) deals with certain contingencies enumerated therein, clause (b) provides that statement made and signed would be relevant for the purposes of proving the truth of the facts contained in that statement only when the person whom made the statement is examined as witness before the Court. (her, the adjudicating authority). 9.2 At this juncture, we need to notice the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based by the adjudicating authority. A rational, logical and fair interpretation of procedure clearly spells out that before the statement is treated relevant and admissible under the law, the person is not only required to be present in the proceedings before the adjudicating authority but the adjudicating authority is obliged under the law to examine him and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. Therefore, we would say that even mere recording of statement is not enough but it has to be fully conscious application of mind by the adjudicating authority that the statement is required to be admitted in the interest of justice. The rigor of this provision, therefore, could not be done away with by the adjudicating authority, if at all, it was inclined to take into consideration the statement recorded earlier during investigation by the Investigation officers. Indeed, without examination of the person as required under Section 9D and opinion formed as mandated under the law, the statement recorded by the Investigation Officer would not constitute the relevant and admissible evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiary value in the absence of any corroborative evidence. In the instant case we find that the procedure set out in Section 9D has not been followed by the adjudicating authority. The request for cross examination of the panchas and others whose statements were relied upon in the impugned order must have been considered by the adjudicating authority. The adjudicating authority has not given any proper reason for rejecting their request for cross examination. Cross examination is all the more required when the statements stand retracted. In view of the above, we hold that the statements recorded in this case cannot be relied upon to confirm the demands as the procedure set out in Section 9D has not been followed. Accordingly, answer to the Question (i) raised in Para 9.3 supra is in the negative. 14. The next question raised is whether the evidences available on record indicate that four packing machines installed in the unregistered premises were in working condition and used for manufacturing of Chewing Tobacco. We observe that four packing machines were found in the unregistered premises on the date of search on 02.08.2010. The contention of the Appellant is that all the four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of other evidences. Instead, the investigation has relied solely on the statement to demand duty. There is no evidence available on record to disprove the claim of the Appellant that the machines were non-operational and not used for manufacture of Chewing Tobacco. Mere statements alone are not sufficient to establish manufacture and clandestine clearance of chewing tobacco. In the absence of any other evidence other than the retracted statements, we hold that the investigation has not established that the four packing machines were in operating condition and used for clandestine manufacture and clearance of Chewing Tobacco. Accordingly, the answer to question no.(ii) is in the negative. 15. The next question to be answered is whether evidences available indicate that Rule 18(2) of the CTPM Rules applicable in this case to demand duty in respect of all the 4 packing machines, from April 2010 onwards, as provided in the said Rules. Rule 18(2) of CTPM Rules states that if it is found that goods have been manufactured in or cleared from a unit which is not registered with the jurisdictional Central Excise Office, then, the duty liability of such unit shall be determined on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant portion of the decision is reproduced below: 7. The whole case of the demand against the appellant is on the basis of the availability of three machines in the premises verified by the Central Excise Officers. The demand was confirmed by considering these machines as having been used for illicit packing of excisable goods which were later cleared resulting in non-payment of duty. Admittedly, no other corroborative evidence has either been collected or presented by the officers in confirmation of such demand. In such situation, the actual condition of the machine at the time of detention of the said machines has become crucial. We note that the appellant on various occasions (25-2- 2011, 18-3-2011, 19-5-2011, 4-7-2011, 8-7-2011, 14-7-2011) repeatedly requested for examination of the machines by the experts. The same was not accepted by the Department. We are not able to understand as to why such a vital aspect of investigation, that too on repeated requests of the appellant, was not accepted by the Revenue. Apparently, such examination by experts would have clearly brought out the exact status of the machines, the possibility of such machines having been put to use for cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a unit, which is not registered with the jurisdictional Central Excise Officers, then the duty liability of such unit shall be determined on the basis of number of packing machines found available in the premises of the unit, unless evidence to the contrary is provided to the satisfaction of the central excise officers, such machine shall be determined to have been in operation. Keeping in view the above provisions of the Rules, we find that the non- functional scrap condition of the machines have been repeatedly asserted by the appellants on many occasions during the course of investigations. No verification or technical examination of the machines have been carried out by the department to establish the functional capability of the machines. Since the machines were detained and were under custody of the department, the repeated prayer of the appellant for technical examination is the only rebuttal the appellant could make in terms of Rule 18(2). Admittedly, the machines were not in operation at the time of the visit by the officers and were not having many essential parts including motors. This has been recorded in the impugned order. However, the Original Authority inferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Kumar, Shri Pramod Kumar Sharma, Shri Deepak Sharma, Shri Dinesh Jogi and Shri Babu Lal Meema. Shri Rajesh Goyal retracted his statement immediately at the earliest possible occasion. Though the other persons did not retract their statements, their cross-examination was sought by the appellant, which was not allowed by the Adjudicating Authority. However, reliance was placed on these statements as a corroborative evidence to conclude that these machines were in fact used for packing dutiable items. As such, in terms of 2010 Rules, duty liability was determined. In this connection, we note that denial of cross- examination and relying on the statements, put the impugned order in legal jeopardy. The provisions of Section 9D of the Central Excise Act, 1944 is very clear. By now, it is well-settled legal position that the Adjudicating Authority, if he intends to rely on the contents of any statement recorded under the Central Excise Act, 1944, then the procedure, as prescribed under Section 9D, has to be followed scrupulously. In fact, in a recent decision, the Hon ble Punjab Haryana High Court in the case of Jindal Drugs Pvt. Ltd. - 2016 (340) E.L.T. 67 (P H) held that Adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar to that of the case and the ratio of this decision is squarely applicable to the present case on hand. By following the decision cited above, we hold that the provisions of Rule 18(2) cannot be invoked in this case to demand duty for the period from April 2010 to August 2010. Accordingly, the answer to question no. (iii) on Para 9.3 is in the negative. (iv)Whether penalty under Rule 18(1) of the CTPM Rules read with Section 11 AC of the Central Excise Act, 1944, imposable in this case? 16. The findings of the adjudicating authority recording imposing of penalty to reproduced below:- 5.20 As regards Penalty, I find that the assessee has contravened the provisions of CTPM Rules. The assessee neither followed the procedure of declaration of machine as per Rule-6. The noticee was also engaged in clandestine manufacture and removal of the notified goods without payment of duty as stipulated under Notification 16/2010-CE dated 27.02.2010 and Notification 19/2010-11-CE dated 13.04.2010 and consequently they have failed to maintain any record of production and sale of such notified goods produced, thereby suppressed the facts from the department. All the above commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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