2001 (5) TMI 515 - AT - Central Excise

Issues Involved:
1. Ownership and operation of the clandestine unit at Laxmi Nagar.
2. Legal admissibility of evidence and witness statements.
3. Involvement of Appellant No. 1 (Company PGL) and Appellant No. 2 (Managing Director) in the clandestine manufacture and removal of goods.
4. Liability of Appellant No. 3 (Sunil Kumar Khanna) in the clandestine operations.
5. Liability of Appellant No. 4 (Om Prakash Tolani) regarding the confiscated vehicle.
6. Imposition of duty demand and penalties.

Issue-wise Detailed Analysis:

1. Ownership and Operation of the Clandestine Unit at Laxmi Nagar:
The clandestine unit at Laxmi Nagar was alleged to be owned and operated by the company PGL and its Managing Director. However, the evidence did not support this claim. The unit was found to be owned and run by Sunil Kumar Khanna, who admitted to manufacturing and removing pan masala without payment of duty. There was no evidence linking the company PGL or its Managing Director to the ownership or operation of this unit.

2. Legal Admissibility of Evidence and Witness Statements:
The statements of Babu Bhai T.A. and K. Soman, who were found working at the Laxmi Nagar unit, were recorded without the presence of the company PGL and were not subjected to cross-examination. Therefore, these statements could not be legally used against the company PGL or its Managing Director. The provisions of Section 9B of the Central Excise Act, which allow the use of such statements in prosecution, were not applicable in adjudication proceedings.

3. Involvement of Appellant No. 1 (Company PGL) and Appellant No. 2 (Managing Director):
The Commissioner relied on various pieces of evidence, including witness statements, documents recovered from K. Soman's room, and the installation of a telephone belonging to the Managing Director at the factory premises. However, the evidence did not conclusively prove the involvement of the company PGL or its Managing Director in the clandestine operations. The documents recovered did not show any direct or indirect involvement of the company PGL in the manufacture and removal of goods at Laxmi Nagar.

4. Liability of Appellant No. 3 (Sunil Kumar Khanna):
Sunil Kumar Khanna admitted to owning and operating the clandestine unit at Laxmi Nagar and to manufacturing and removing pan masala without payment of duty. He did not dispute his liability for payment of excise duty. The Commissioner upheld the penalty, confiscation of machines, raw material, and finished goods seized from his factory, and the imposition of redemption fine on him.

5. Liability of Appellant No. 4 (Om Prakash Tolani) Regarding the Confiscated Vehicle:
The Commissioner ordered the payment of redemption fine by Om Prakash Tolani for the release of the seized vehicle. However, it was observed that there was no evidence to prove that Om Prakash Tolani had knowledge that his truck was being used for transporting contraband goods. Therefore, the order against him could not be sustained.

6. Imposition of Duty Demand and Penalties:
Since no duty demand could be confirmed against the company PGL and its Managing Director, no penalties under Section 173Q or Rule 209A could be legally imposed on them. The impugned order against these appellants was set aside. The duty demand and penalties were upheld only against Sunil Kumar Khanna.

Conclusion:
The appeals of the company PGL (Appellant No. 1), its Managing Director (Appellant No. 2), and Om Prakash Tolani (Appellant No. 4) were allowed, setting aside the impugned order against them. The appeal of Sunil Kumar Khanna (Appellant No. 3) was dismissed, upholding the penalties, confiscation, and redemption fine imposed on him.

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