2019 (3) TMI 547 - AT - Central Excise

Clandestine removal - Gutkha - 35 rolls of packaging material was found near the main gate of the factory premises, not entered in the records - shortages in stock - Held that - Gomti brand Gutkha was owned by M/s.HMC which is a proprietory unit of one Shri Rajesh Kr.Gupta. The said owner of the brand name was getting the goods manufactured from Shimla Food and Flavours as also from Shimla Chemicals and was buying their entire production himself. He was further selling the goods to various customers either directly from their premises, in which case the customers were booking the goods through the transporters on their own or the said goods were being booked by M/s.HMC through M/s.Lucknow Tulsipur Forwarding Agency for which various GRs/Challans were being issued by the said agency - the goods being transported through the said agency were Gutkha and not Zarda, which was being written in the GRs/invoices - also, such bookings at the Transport Agency were being done by M/s HMC and not by SC or SFF. As such, even if the statement of Shri Indra Bahadhur Singh is accepted to be true, the same would relate to M/s HMC, who was not the manufacturer of Gutka and can no way reflect upon the clearances from SC or SFF. The Revenue has further relied upon the statements of some of the buyers and the discrepancy of the stock at their premises found as a result of searches. However, as we have earlier observed that the entire production manufactured by the appellant was being sold by them to M/s.HMC who was doing trading in various products including the tobacco and Zarda. Though it is well settled law that the statements of the third parties cannot be made the basis for arriving at the conclusion of clandestine removal, without corroborative evidence, but even if presuming that the said statements were correct, it is the HMC who has sold the goods in cash to the buyers - The Revenue is expected to produce evidences showing the manufacture of goods by SC and SFF and its further clearances to HMC in a clandestine manner. The entire case of the Revenue is based on uncorroborated, untested, unexamined and in some case retracted statement which do not inspire confidence in the same. As such the said statements have to be kept out of consideration and cannot be considered to be relevant evidence. If the same are ignored nothing remains as evident to substantiate the Revenue s allegation of clandestine removal. There is virtually no evidence on record to show that the two manufacturing units M/s Shimla Chemicals & M/s SFF were clearing their goods in a clandestine manner. As already observed the entire case of the Revenue is based upon the statement and if the same are not taken into consideration no other evidence is available on record. The evidence produced by the Revenue do not establish their case even on the principle of preponderance of probability. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Confirmation of duty and imposition of penalties.
2. Seizure of goods and confiscation of Indian currency.
3. Allegations of clandestine manufacture and removal.
4. Evidentiary value of statements and cross-examination.
5. Procurement and use of raw materials.

Detailed Analysis:

1. Confirmation of Duty and Imposition of Penalties:

The Tribunal addressed appeals arising from two orders confirming duties and imposing penalties on various parties. The first order confirmed duties of ?59,400 and ?45,27,103 on M/s. Shimla Food & Flavours (SFF) and ?72,76,500 on M/s. Shimla Chemicals (SC), along with identical amounts of penalties. The penalties were also imposed on individuals associated with these entities.

2. Seizure of Goods and Confiscation of Indian Currency:

The Tribunal examined the seizure of 22 bags of Gutkha from a van outside the premises of M/s. Himachal Marketing Company (HMC) and the confiscation of ?4,00,000 from M/s. Aanchal Polypack. It was found that the seized goods were duly accounted for in the records of SFF and HMC, and the confiscation of the currency lacked sufficient evidence linking it to clandestine activities. Consequently, the confiscations were set aside.

3. Allegations of Clandestine Manufacture and Removal:

The Tribunal scrutinized the allegations of clandestine manufacture and removal of Gutkha by SFF and SC. The Revenue's case relied heavily on statements from transporters and buyers, which indicated that Gutkha was transported under the guise of Zarda. However, the Tribunal found that the evidence was based on hearsay and lacked corroboration. The Tribunal emphasized that the burden of proof lies with the Revenue, and mere assumptions and presumptions are insufficient to establish clandestine activities.

4. Evidentiary Value of Statements and Cross-Examination:

The Tribunal highlighted the importance of cross-examination in validating statements used as evidence. It was noted that the statements of key witnesses, including the booking clerk of the transport agency, were not subjected to cross-examination. Citing various judicial precedents, the Tribunal concluded that uncorroborated and unexamined statements could not be relied upon to substantiate the allegations. The Tribunal referenced decisions from the Allahabad High Court, Punjab & Haryana High Court, and other courts to support this view.

5. Procurement and Use of Raw Materials:

The Tribunal examined the procurement of raw materials, particularly Supari, which was allegedly used in the clandestine manufacture of Gutkha. The Revenue's case was based on the statements of brokers and suppliers, but no concrete evidence was provided to show the procurement of other essential raw materials. The Tribunal reiterated that the manufacture of Gutkha involves multiple raw materials, and the absence of evidence for all components weakens the Revenue's case.

Conclusion:

The Tribunal set aside both orders confirming duties and imposing penalties, allowing all appeals with consequential relief to the appellants. The Tribunal emphasized the need for tangible and positive evidence to establish allegations of clandestine activities and highlighted the significance of cross-examination in validating statements used as evidence. The Tribunal's decision was guided by established legal principles and judicial precedents, ensuring a thorough and fair assessment of the case.