2014 (6) TMI 382 - AT - Central Excise

Clandestine removal of goods - presumption - proof by identification of handwriting or signature - evidential value of opinion of the Govt. handwriting expert - manufacture of Shimla & Vansh brand Gutkha, Pan Masala & Mouth Freshner which is sold in retail pouches - majority order - Held that - opinion of handwriting expert is a weak evidence which should be taken with caution and is not reliable unless supported by other independent evidence. The allegation against the Respondent Company is sought to be proved by the opinion of the handwriting expert Sh. C.T. Sarwate, as Sh. Arvind Gupta of M/s. Hans Travels has not named Sh. Subhash Joshi and Sh. A.C. Upadhyay, the employees of the Respondent, as the persons who had taken delivery of the consignments of outer pouches in his presence and had signed the delivery sheets and neither anyone familiar with their signatures has identified the signature on the luggage delivery sheets nor they have accepted the signature on the luggage delivery sheets as their signatures. For testing the correctness of the opinion of Sh. Sarwate, his cross examination was necessary, as other handwriting expert Sh. A.N.Ganorkar has given a contrary opinion and both Sh. Subhash Joshi and Sh. A.C.Upadhyay have stated that signatures on the documents of M/s. Hans Travels are not their signatures. But cross examination of Sh. Sarwate was not possible on account of his death. Therefore, the opinion of Sh. C.T.Sarwate, by itself, has no evidentiary value and in view of the judgments of Apex Court, and various high courts, mentioned above it not even admissible as evidence. The allegation of un-accounted receipt of outer pouches for packing of retail pouches of Gutkha, Pan Masala and Mouth Freshner cannot be upheld, the presumption of un-accounted manufacture of retail pouches of Gutkha, Pan Masala and Mouth Freshner and their clearance without payment of duty, cannot be made and as such, the duty demand against the Respondent cannot be upheld. The Commissioner has dropped the duty demand only on the ground that merely on the basis of alleged receipt of outer pouches for packing retail pouches of Gutkha, Pan Masala & Mouth Freshner without any other evidence regarding procurement of other raw-materials like plastic lamination for retail pouches, Supari, Kattha, Tobacco etc. the duty demand is not sustainable. - for making such a presumption of fact under Section 114 of the Indian Evidence Act, which would shift the burden of proof to the assessee, there must be cogent and concrete evidence of the fact of un-accounted receipt of any one or more of the principal raw-materials or evidence of un-accounted consumption of the principal raw-materials which admittedly had been received. Merely on the basis of the fact that there was no production of Shimla 2-in-1 Pan Masala during Sept. 01 to Dec. 01 and during this period only 21,800 outer pouches for Shimla Gutkha had been used, it cannot be presumed that 52,800 outer pouches for Shimla Gutkha and 16000 outer pouches for 2-in-1 Shimla Pan Masala had been used in the manufacture of un-accounted Shimla Gutkha and Shimla 2-in-1 Pan Masala, which had been cleared clandestinely without payment of duty, as their consumption for accounted production during August 2001 has not been ruled out. - Decided against Revenue.

Summary

Issues Involved:
1. Alleged Clandestine Activities by M/s MSS Food Products.
2. Evidence of Receipt of Outer Pouches.
3. Handwriting Expert's Opinion.
4. Financial Corroboration of Payments.
5. Procurement of Raw Materials.
6. Seizure of Goods from Third Parties.
7. Discrepancies in Stock Records.

Issue-wise Detailed Analysis:

1. Alleged Clandestine Activities by M/s MSS Food Products:
The Revenue alleged that M/s MSS Food Products was engaged in the clandestine manufacture and clearance of Pan Masala, Gutkha, and Mouth Freshener using outer pouches supplied by M/s Flex Industries Ltd. to fictitious parties. The Commissioner, however, found that the evidence provided by the Revenue was largely based on assumptions and lacked concrete proof. The Commissioner noted that the mere fact that M/s Flex Industries supplied outer pouches with the brand name 'Shimla' does not conclusively prove that these were received by M/s MSS Food Products for clandestine activities.

2. Evidence of Receipt of Outer Pouches:
The Revenue's case relied heavily on the statements of officials from M/s Flex Industries and transporters, as well as documents recovered from M/s Hans Travels. The Commissioner found that these documents and statements were not sufficient to establish that the outer pouches were received by M/s MSS Food Products. The Commissioner also noted that there were other manufacturers using the 'Shimla' brand name without authorization, which could explain the presence of these pouches.

3. Handwriting Expert's Opinion:
The Revenue presented an opinion from a handwriting expert, Shri C.T. Sarwate, who identified the signatures on the delivery sheets as those of employees of M/s MSS Food Products. However, the Commissioner found this evidence weak, especially since the handwriting expert was not available for cross-examination due to his death. The Commissioner also considered a contrary opinion from another handwriting expert, Shri A.N. Ganorkar, which suggested that the signatures were forged.

4. Financial Corroboration of Payments:
The Revenue attempted to establish a financial link between M/s MSS Food Products and M/s Flex Industries through demand drafts purchased by third parties. The Commissioner found that this financial chain was weak and contained several gaps. The statements from third parties, such as M/s Manoj Provision Stores and M/s S.B. Traders, did not conclusively link the payments to M/s MSS Food Products.

5. Procurement of Raw Materials:
The Commissioner noted that there was no evidence of the procurement of other raw materials necessary for the manufacture of the final products. For such large-scale clandestine activities, significant quantities of raw materials like Supari, Katha, and Menthol would be required, but no evidence of such procurement was presented by the Revenue.

6. Seizure of Goods from Third Parties:
Goods seized from M/s Shree Ganesh Sugandhi Bhandar and M/s Hans Travels were found to be without duty-paying documents. However, the Commissioner noted that these goods could have been manufactured by other unauthorized manufacturers using the 'Shimla' brand name. The Commissioner accepted the respondent's argument that they had filed complaints against such unauthorized manufacturers.

7. Discrepancies in Stock Records:
The Revenue alleged that M/s MSS Food Products failed to account for a significant number of outer pouches. The Commissioner found that this allegation was not substantiated by concrete evidence. The Commissioner noted that the stock of pre-printed laminates at the respondent's factory matched the recorded balance, and no discrepancies were found during the search.

Conclusion:
The Commissioner concluded that the Revenue failed to provide sufficient evidence to substantiate the allegations of clandestine activities by M/s MSS Food Products. The evidence presented was largely based on assumptions and lacked concrete proof. The Commissioner, therefore, dropped the demand for duty and other penalties against the respondents. The Tribunal upheld the Commissioner's order, noting that the Revenue's case was weak and based on hearsay evidence. The Tribunal also emphasized the need for concrete and tangible evidence to prove charges of clandestine activities.