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TMI Blog2007 (3) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... se Act 44 (the Act). The seized chewing tobacco and vehicle seized were confiscated with option for redemption. Penalties were also imposed on the other appellants. Vide Final Order Nos. 1214-1221/2005 dated 9-8-05, disposing the appeals filed by the appellants against the above Order in Original No. 10/2004 dated 27-10-2004, the Tribunal remanded the case for readjudication. The Tribunal had noted that the adjudicating authority had ignored the evidences furnished by A.R. to disprove the allegations and had passed the order without proper application of mind. 2. The impugned order No. 10/2006 dated 20-7-2006 has been passed following the above final order remanding the matter to the Commissioner. The order disposes two Show Cause Notices. The first deals with non duty paid pasu brand chewing tobacco seized from A. R. and its agents at various places and the seized vehicle used to transport part of the tobacco seized. The second notice had proposed to demand duty amount of Rs. 1,99,90,132/- under Section 11A of the Act for clearances of branded chewing tobacco without payment of duty during the period April 1997 to July 2001 along with appropriate interest. It was also proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am Agent of A.R. showed details of receipts of Pasu brand product. The adjudicating authority noted that these agents being co-noticees in the Show Cause Notice had retracted their statements as they were concerned with the outcome of the proceedings against A.R. and as they also were likely to be penalized. The R.G. 12 of A.R. showed purchase of 43000 Kgs. of raw tobacco between 19-9-97 to 30-7-2001. However, on the date of visit of officers there was a balance of 1,54,850 kgs. of raw tobacco in the factory which was not explained or disputed by A.R. Whereas procurement of 3,20,000 kgs of tobacco through Shri Shiva Ganesh Kumar was admitted by A.R., they had accounted only 43000 kgs. of tobacco during the period 97-98 to July 2001. In view of the unexplained stock, the Commissioner found that the procurement of unaccounted raw tobacco alleged in the notice was established. Though Shri V.R.K. Ravi, a broker had deposed during cross-examination that he had transacted only with Smt. Revathi of Shri A. Ravindran s family, it transpired that he had sold tobacco to family members of A.R. except Shri A. Ravindran, which showed a deliberate design. Shri K.R. Rao, a dealer in raw tobacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, SVP admitted that one fifth or one sixth of the total bags supplied to A.R. alone were accounted. Shri Pakkirisamy and Shri Srinivasan of SVP had retracted their statements during cross-examination. However, the accounts of SVP showed that they had clandestinely cleared polythene bags. Shri A. Ravindran had testified receiving unaccounted poly-bags cleared by SVP. The adjudicating authority rejected the contention of the noticees that the quantification of clearances was inaccurate with reference to polythene bags. Polybags obtained from other manufacturers also were not accounted as per their statements. 5. In support of the claim that all the male members had been engaged in tobacco trade and had purchased and sold raw tobacco the appellants had produced I.T. returns for the years 97-98 to 2001-2002. The Commissioner found that the I.T. returns and annexures were not acceptable as I.T returns were only photocopies. Moreover, he found that total quantity of tobacco traded in by the family members in 1999-2000 and 2000-2001 for which I.T. returns were filed did not explain the disposal of raw tobacco procured as ascertained and alleged in the Show Cause Notice. Shri A. Ravind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. In respect of other entries in various documents reckoned by the Commissioner, it was submitted that none of the entries could be identified as relating to clearances of Pasu brand chewing tobacco. The agents who had identified such entries as relating to Pasu brand chewing tobacco retracted their statements during cross-examination. The agents deposed that their statements had been recorded under coercion. They had also dealt with chewing tobacco of different brands or also raw tobacco. DDs taken in the names of various family members of Shri A. Ravindran by dealers in tobacco were wrongly presumed to be for sale of Pasu brand tobacco. A.R had made duty paid clearances through M/s. Jayavilas Agencies. Receipts from M/s. Jayavilas Agencies had been wrongly counted as non-duty paid clearances. Documents recovered from transporters such as ABT, ARC and TVS were relied on to find that they had transported non duty paid tobacco dispatched by A.R. These transactions had also been endorsed in the statements of the staff at the various offices of ABT, ARC and TVS who were contacted during investigation. It was claimed by the appellants that none of the documents recovered indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in some of the documents. These pertained to transport of tobacco to his godowns. The department had made errors in quantifying supply of tobacco by this broker. 8. Another source of tobacco identified was Shri K. Ramakrishna Rao, who had supplied tobacco originating from Andhra region. A quantity of 4,80,000 kgs. alleged to have been sourced from Shri K.R. Rao, during 97-99 to 99-2000, was based purely on his statement and not supported by any evidence. This tobacco was grown in Eluru region of Andhra Pradesh, which was used to manufacture cheroot . This tobacco had been purchased for further sale. That the tobacco of Eluru region was not useful for the manufacture of chewing tobacco was certified by the Tobacco Board, Guntur as well as the Village Administrative Officers of the region. Therefore, the allegation of manufacture of chewing tobacco from the raw tobacco purchased from this region was not sustainable. Moreover, the alleged purchase during 97-98 to 99-2000 had not been made and the purchase was not substantiated. 9. The department had relied upon details of DDs taken from Karur Vysya Bank of Thottiyam, payable at Eluru in evidence of purchase of tobacco by A.R. fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dran did not have knowledge of English, Telugu Kannada and Malayalam, the statements recorded in the languages were also shown to him and he was asked to accept their contents. It was humanly impossible for any person to peruse such a huge volume of documents and confirm the correctness of the same. This disproved the veracity of the statements and no separate retraction was necessary for such statements. 15. The department had alleged that the appellants had procured a total quantum of 27,85,931 Kgs. of raw tobacco, during the demand period. The total quantum of raw tobacco required for the manufacture of the alleged quantum of clandestinely removed Pasu brand chewing tobacco, would be 11,21,760 Kgs. (Approx.). A quantum of around 1,50,000 kgs. was found in the godown of the family members of the noticee. From the above, the department itself had accepted that the balance quantity of raw tobacco would have been disposed off in some other manner (sale as such, conversion into kathai/kattu/thundu tobacco, etc.). 16. During hearing the Ld. Counsel for the appellants admitted that they had made clearances of pasu brand tobacco without payment of duty in certain compelling circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they had already paid the duty. This amount worked out to Rs. 3,57,154/- 19. We observe that the finding of clandestine clearances of branded tobacco by A.R. has been made by the adjudicating authority on the basis of several documents including diaries and registers seized from the various premises of A.R. or his agents. This finding has been attempted to be supported by evidence of unaccounted procurement of raw tobacco. This evidence is mainly in the form of DDs taken in the names of family members of Shri A. Ravindran towards sale of branded tobacco and DDs drawn by these persons for payment to suppliers of raw tobacco. 20. We find that the entries in various records and registers relied on by the adjudicating authority do not support a finding that they related to non duty paid clearances of pasu brand tobacco. Statements from various agents relied on to find that these entries related to clearances of non duty paid tobacco received by them were retracted during the cross examination of those witnesses. Barring clearances described in the registers as those of pasu brand tobacco the remaining clearances reckoned as of unaccounted non duty paid tobacco are not supporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock-in-trade of the family. A quantity of 4,80,000 kgs. of raw tobacco was found to be procured from Shri K.R. Rao during 97-98 to 99-2000 based solely on his statement. The purchases during 97-98 to 99-2000 are not found substantiated. The Tobacco Board, Guntur as well as the jurisdictional Village Administrative Officers (VAO) of Eluru region had certified that tobacco cultivated in that area was suitable only for manufacture of cheroot and was not suitable for chewing. The Commissioner has not questioned the authenticity of these certificates or the competence of authorities who issued them. The adjudicating authority rejected those certificates on the basis that the certificates pertained to air cured tobacco whereas the tobacco involved was raw tobacco. As air cured tobacco only connotes dried, we find that the Commissioner rejected the certificate without any valid reason. Therefore, his finding as regards the raw material for the clandestine clearances to the extent procured from Eluru region is incorrect. Apparently, the tobacco procured from this region related to tobacco purchased for resale by Shri A. Ravindran s family. The witnesses examined by the appellants depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether their explanations regarding the DDs and the transactions in raw tobacco were acceptable. However, photocopies of IT returns cannot be accepted as evidence. We find that the Commissioner discarded this evidence for justifiable reasons. As regards the evidence of transporters such as ABT, TVS and ARC, the personnel who had given statements retracted them and deposed during cross examination that what they had helped transport was described as tobacco and they could not vouch that the same was branded chewing tobacco. 23. On a careful assessment of the evidences relied on by the Commissioner in passing the impugned order we find that he had gone by unreliable evidences and considerations. The appellants have convincingly brought out the infirmities in the reasoning followed in the impugned order. Therefore, we have no hesitation in setting aside the demand as unsubstantiated except to the extent of the duty not paid as admitted by the appellants. Appellants admitted a liability of Rs. 1,32,594/- on the seized tobacco and Rs. 3,57,154/- on other non duty paid clearances. As regards the goods seized we find that the tobacco and the vehicle were confiscated in accordance with ..... 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