TMI Blog2024 (3) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusions to be arrived at are necessarily to be logical and not on the basis of presumptions and assumptions. Suspicion, howsoever grave, cannot replace the test of proof. It is a settled law that there cannot be clandestine removal of the goods unless the assessee manufactures the same clandestinely and for that purpose, procures raw material clandestinely and uses it without disclosing its utilization. Admittedly, there is no evidence of purchase of major raw material like supari, tobacco etc even in the loose sheets/Hisaba Books recovered in the search. Revenue has not produced any evidence about the procurement of raw material which may be regarded as sufficient for the manufacture of the final product, which is alleged to have been clandestinely removed. In the present case, there is no evidence to show that the basic raw material required for the manufacture of huge quantity of Gutkha and Khaini was procured by the respondents. Tribunal also found no tangible evidence of removal from the factory of unaccounted goods allegedly manufactured by loading from factory and transportation there from. Tribunal found no reliable evidence of the actual customer/recipient of the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Mr. Justice Ravinder Dudeja For the Appellant : Mr. Harpreet Singh, Senior Standing Counsel with Mr. Jatin Kumar, Advocate For the Respondents : Mr. Karan Bharihoke Mr. Wattan Sharma, Advocates JUDGMENT RAVINDER DUDEJA, J. 1. The present appeal has been filed under Section 35 (G) of the Central Excise Act, 1944 against Order No. A/83-110/2012 Ex (DB) dated 03.02.2012 passed by the Central Excise Sales Tax Appellate Tribunal [hereinafter referred to as CESTAT ], Principal Bench, New Delhi, whereby, the appeal of the respondents herein was allowed vide Appeal No. E/560/06-574-06, 902/06, Ex (DB) E/2039-2050/06-Ex dated 14.02.2012. BACKGROUND 2. M/s. Kuber Tobacco Products (P) Ltd. (hereinafter referred as KTPL ) were engaged in the manufacture of Gutkha/Pan Masala bearing the brand name Kuber Moolchand etc. . M/s. Kuber International (India) Ltd. [hereinafter referred as KTIL ] were engaged in the manufacture of chewing tobacco and Khaini. 3. Pursuant to the information received that the respondents were indulging in clandestine removal of goods and evasion of duty, the Investigating Agency of the Revenue Department conducted a search at six different places on 09.10.1998 namely, 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,95,79,744/- cleared clandestinely without payment of duty during the period from 01.08.1995 to 28.02.1997 along with interest and for appropriation of an amount of Rs. 2 Crore already paid by them voluntarily; (b) Revision and enhancement of the assessable value of the goods cleared during the period from 01.08.1995 to 28.02.1997, as detailed in the show cause notice and recovery of differential duty amounting to Rs. 45,45,084/- in respect of these clearances along with interest; (c) Confiscation of land and building, plant and machinery of KTPPL used in connection with manufacture of branded goods; (d) Imposition of penalty on KTPPL; (e) Imposition of penalties on Shri Mool Chand Malu, Shri Vikas Malu, C.S. Baid, Shri Shubh Karan Bothra, Shri Mukesh Kapoor of M/s. Ganpati Agencies and M/s. Ganpati Mktg., Shri Gauri Shankar Khattar of M/s. Delhi Marketing Co. M/s. New Delhi Mkgt. Co., Shri Jarnail Singh of M/s. RKRT Goods Carrier Shri Harmit Singh of M/s. RKRT Goods Carrier, Shri Harpal Sinhgh of M/s. RKRT Goods Carrier, Shkri Devji Bhai of M/s. Diamond Transport Corporation, Sh. Vijay Singh Daga of M/s. Bikaner Assam Roadlines, Shri Pawan Kumar Karnani of M/s. Mahamaya Trade Age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri C.S. Baid Rs. 50 Lakhs (iv) Shri Subh Karan Bothra Rs. 30 Lakhs (v) Shri Mukesh Kapoor Rs. 20 Lakhs (vi) Shri G.S. Khattar Rs. 20 Lakhs (vii) Shri Jarnail Singh, Harmit Singh Sh. Harpal Singh of M/s. RTRK Good Carriers Rs. 10 Lakhs on each (viii) Shri Devji Bhai M/s. Diamond Transport Co. Rs. 20 Lakhs (ix) Shri Pawan Kumar Karnani of M/s. Mahamaya Trade Agencies Rs. 30 Lakhs (x) Shri Vijay Singh Daga of M/s. Bikaner Assam Roadlines No penalty (xi) Shri Dilip Ram Vallabh Sarda of M/s. Dilip Traders, Nagpur Rs. 05 Lakhs (xii) Shri Bhim Karan Jain of M/s. Snow View Exports Pvt. Ltd. Rs. 20 Lakhs (xiii) Shri A.C. Kothari of M/s. Kothari Agencies, Delhi Rs. 05 Lakhs (xiv) Shri Ashok Chaudhary Proprietor of M/s. Chaudhary Sales Corporation, Guwahati Rs. 03 Lakhs 8. Against this order of the Commissioner, Appeals Nos. E/560- 574/2006 and E/902/2006 were filed. 9. Show Cause Notice dated 23.11.2000 was adjudicated by the Commissioner of Central Excise, Delhi vide Order-in-Original No. 30/06 dated 03.01.2006 by which:- (a) total central excise duty demand of Rs. 4,18,29,655/- (Rs. 3,47,22,118 + Rs. 71,07,737/-) on account of clandestine removal and undervaluation of goods was confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of clearances w.e.f. 28.09.96. The penalty on KTPPL and KI under Section 11 AC of Central Excise Act, 1944 shall be requantified by the Commissioner as per the directions in para 6 above for which the matter is remanded to the Commissioner. The appeals stand disposed of as above. Opinion of the third Member on reference: 13. In view of the above difference, the matter went before the third Member (Judicial) Mr. M.V. Ravindran. Mr. Ravindran agreed with the opinion of the President (Judicial) Justice R.M.S. Khandeparkar and disagreed with Mr. Rakesh Kumar, Member (Technical). 14. The resultant position was that by majority of 2:1, the appeals were allowed. 15. Present appeal has been filed against the majority view of the Tribunal. The following substantial question of law was framed:- Whether the majority opinion is right in accepting the appeal and deleting the entire addition and whether the majority opinion is perverse? SUBMISSIONS : 16. Arguments have been heard at length from Sh. Harpreet Singh, Senior Standing Counsel, appearing for the appellant/department as also Sh. Karan Bharihoke Mr. Wattan Sharma, Advocates, appearing for the respondents. 17. The main pieces of evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been further argued that the entries in the resume and statutory record provide robust evidence that the documents recovered indeed pertain to KTPPL KI. It is also argued that the unopposed opening of the premises by Mr. Bothra and the absence of any subsequent protest indicates his control over the keys and therefore the assertion by respondents disowning the premises and the recovered documents are to be discarded as an afterthought, given the lack of objection at the initial stage. It is also the argument of the learned Senior Standing Counsel that the recovery of 57 bags from the premises of the respondents KTPPL is a substantive piece of evidence and even though the physical verification did not reveal excess stock, the loose papers detailing clearance and the raw material purchases during the specific period constitute complete evidence of clandestine clearances. It is further argued that the absence of tangible evidence does not diminish the weight of the substantial information contained in the recovered documents. It is thus submitted that the cumulative evidence including the statements, document correlations and physical findings form a robust case against the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence by applying the standard of proof as required to prove the charges in a criminal trial i.e. proof beyond doubt , whereas, the adjudication proceedings are in the nature of civil proceedings and not criminal proceedings and therefore, the standard of proof of civil proceedings i.e. preponderance of probability is applicable in the adjudication proceedings. In this regard, the learned counsel relied upon the decision in the case of Commissioner of Police, New Delhi Vs. Narender Singh reported in (2006) 4 SCC 265 , wherein, it has been held as under:- 12. It is not in dispute that the standard of proof required in recording a finding of conviction in a criminal case and in a departmental proceeding are distinct and different. Whereas, in a criminal case, it is essential to prove a charge beyond all reasonable doubt, in a departmental proceeding preponderance of probability would serve the purpose. 13. It is now settled by reason of a catena of decision of this Court that if an employee has been acquitted of a criminal charge, the same by itself would not be a ground not to initiate a departmental proceeding against him or to drop the same in the event an order of acquittal is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it may appear to the court as such. 35 ............ It is one thing to say that a retracted confession is used as a corroborative piece of evidence to record a finding of guilt but it is another thing to say that such a finding is arrived at only on the basis of such confession although retracted at a later stage. 37 ............. The inference that burden of proof that he had made those statements under threat and coercion was solely on the proceedee does not rest on any legal principle. The question of the appellant's failure to discharge the burden would arise only when the burden was on him. If the burden was on the revenue, it was for it to prove the said fact. The Tribunal on its independent examination of the factual matrix placed before it did not arrive at any finding that the confession being free from any threat, inducement or force could not attract the provisions of Section 24 of the Indian Evidence Act. Therefore, burden was not on the deponents to prove that statements were obtained by threat and coercion. Moreover, had the statements been voluntary and the retraction of statement dated 17.11.1998 been a bald retraction, there was no need to write 'Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medical evidence ought to have been only from a Government Hospital. Shri Mukesh Kapoor and and Shri Gauri Shanker, in their cross-examination conducted on 31.1.2005, said that they have not seen 'hisaba books, and that they were not aware who has written the same. I find that these material aspects have escaped the attention of the Hon'ble Member (Technical). In the above background the sound legal proposition that what is admitted need not be proved, is not applicable in the instant case. For the same reasons, I find that it would not be justified to rely on these oral testimonies in the peculiar facts of the case. 25. I find that the Hon'ble President has correctly relied on the judgment of Hon'ble Supreme Court in the matter Nagubai Ammal and Others- vs B. Shama Rao, AIR 1956 .se 593 wherein it was held that- an admission is not conclusive as to the truth of the matters stated therein. It is only a piece of evidence, the weight to be attached to which matters depends on the circumstances under which it is made. I am unable to find these retracted oral testimonies as credible piece of evidence to sustain the charge against the Appellant Company. 26. It would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although Panchnama drawn at this premises nowhere records the name of the appellant company, he was persuaded to further assume that it was a guest house of the appellant company. Although the names of the consignors on GR/RR were found fictitious, the Hon'ble Member (Technical) was persuaded to assume that the same related to the Appellant company. As rightly observed by the Hon'ble President, even the panchnama' did not describe or identifies in its annexure which enlists the documents stated to have been recovered from the premises, recovery of any 'hisaba book' or 'Kachha Challans' or 'loose sheets with written pages'. I agree with the findings of the Hon'ble President that entire proceedings have lost credibility and serious doubt arises about the credibility of the materials stated to have been collected by Revenue in the course of proceedings. 28. Physical verification conducted at the factory premises of the appellant company did not reveal any excess stock of raw material as such. There is evidence of seizure of 57 bags weighing 87.8 Kgs valued at Rs. 3,76,200/- from the factory premises of KTPPL during the visit of the officers, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys Pvt. Ltd. (2014) 308 ELT 655 (Guj.) was again a case of alleged clandestine removal. The High Court pointed out that there needed to be positive evidence to establish the evasion. It was observed as under:- In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below. 29. The Special Leave Petition filed by the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for any such movement. I do not find cogent evidence of disproportionate and unaccounted receipt and consumption of the basic raw materials and packing material, required for manufacturing alleged quantity of unaccounted finished goods. I do not find tangible proof of unauthorized payment for procuring such unaccounted raw material and packing material. I do not find cogent evidence of disproportionate power consumption, capacity utilization and labour employed, or any cogent evidence of clandestine manufacture of unaccounted quantity alleged as clandestinely removed. I find that unaccounted production in the factory of the appellant company has not been established. In Ruby Chlorates (P) Ltd., Versus Commissioner of C. Ex., Trichy, 2006 (204) E.L.T. 607 (Tri.-Chennai), it was held that : 21 . The settled legal position is that when several raw materials are involved, when a case of clandestine production and clearance is built on clandestine use of raw materials, the same should be proven with reference to unaccounted use of all such major raw materials . 22. In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld manufacture 200 pouches per minute and therefore 137 machines could manufacture 277425000 pouches per month and if all the machines are utilized in three shifts for 25 days in a month, the total production would be 832275000 pouches per month. On the basis of the same, Commissioner made an estimate that for the period of 14 months from 07.05.1997 to 30.06.1998, the total production of KTPPL ought to have been 1165 crores of pouches i.e. 882575 bags and for the period of three months from 01.07.1998 to 05.08.1998 considering the capacity production, it would be 525523 crore pouches i.e. 193356 bags, while the accusation has been restricted to 69551 bags. As regards the electricity consumed, the view of the Commissioner was that the loose sheets disclose that during the period of 20 days i.e. from 11.06.1998 to 30.06.1998, the appellants had purchased 29600 litres of diesel. The DG set consumes 55 liters per hour and therefore there was sufficient diesel to manufacture the high quantity of the goods by the respondents. Since at least two labourers were required to operate each machine, besides other labourers would also be required for packing, crushing of Supari, Kattha, mixing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the actual production capacity of the machines in the respondent s factory. 35. CESTAT ruled that Hisaba Book makes reference to various firms and persons as the buyers of the quantity mentioned therein. However, no attempt was made to record the statement of any such person at all. Member (Judicial) recorded in Para 33 of his order that for confirming charges and for accepting the evidence adduced, a series of assumptions and presumptions are to be made, viz: (i) The total number of machines installed was intimated on 11.8.97, which was not found incorrect by visiting Central Excise Officers or in Audit inspection by CERA and internal audit and there is no evidence of working for more than one shift a day. As per the appellant, the production capacity with such machines, in one shift, is not sufficient to manufacture the alleged huge quantity alleged to be removed in clandestine manner, and moreover, the duty fixed by the Board per machine, if taken into account would also indicate much less production than alleged in the Notice. As rightly observed by the Hon'ble President, the working of the machines in the appellant's factory was not tested or certified to ascertain t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was supplied by them to the appellant company. (vii) Although Shri Chetan Kanodia of M/s Kanodia Technoplast Pvt Ltd, in his statement denied the contents of loose sheets and denied having sold laminations without invoices or having received payments in cash against any such sale, it is to be assumed that the alleged unaccounted laminations were sold by him to the appellant company. (viii) There is no evidence of any fruitful inquiry from any Courier services, despite allegation of dispatch of Kachha Challans by the appellant company through any Courier Service, however it is to be presumed that the same were sent through Courier by the appellant company. (ix) It is to be assumed that huge quantity of 91445 bags was removed from factory in a clandestine manner. (x) Although the amount of Rs. Two Crores deposited during the investigations was clearly deposited by recording on the Challans 'Duty under protest', it is to be assumed that the said payment was voluntary with acceptance of the clandestine removal. (xi) It is to be assumed that Original Kachha Challans must have been destroyed by all of the alleged distributors/dealers. (xii) It is to be assumed that 'packet&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence to back such claims. There is also no verified assessment of the production capacity of the installed machines in a single shift operation nor any evidence to suggest that the factory was operating beyond the stated capacity. Assertions by the Revenue about the production capacities are speculative without testing or certification by the competent authority. 38. The physical verification of the stocks and the absence of discrepancies in the recorded quantity of the raw material as well as the lack of evidence regarding the purchase of significant quantities of raw materials and cash undermine the presumption of unaccounted manufacture. Furthermore, the recovery of documents from the premises unrelated to the respondents and reliance of such documents to establish clandestine operations are found to be procedurally flawed and legally untenable by the learned CESTAT. The reliance by the Revenue on the statements that have been retracted or challenged in cross-examination, without corroborating evidence weakens the credibility of such testimonies as the basis for establishing the guilt. Based upon above, learned Tribunal (Majority view) has rightly concluded that the evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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