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TMI Blog2013 (9) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... ished, even otherwise there can be no clandestine removal thereof - Unaccounted removals have in any case not been established on the basis of the evidence available on record. What is the relevancy of the documents seized in the course of the panchnama in the case in hand. In that regard, it would be necessary to ascertain as to what were the documents those were seized by the investigation machinery, what is the relevancy of those documents to bring home the charge against the appellants and to what extent - can it be said that any credibility can be given to the so-called documentary evidence sought to be relied upon to support the charge of clandestine removal of the goods by the appellants - Neither the panchnama satisfies the minimum requirement of rules of procedure nor any credibility can be given to the materials allegedly seized in the course of such panchnama nor to the documents sought to be relied upon in the matter. The appellants were justified in making grievance of prejudice having been suffered by them on account of uncorroborative documentary evidence relied upon by the department. Ganga Rubber Industries vs. CCE [1986 (6) TMI 214 - CEGAT, NEW DELHI] - it was for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pushkarna, Advocates, for the Appellant. Shri B.K. Singh with R.K. Verma, Jt. CDR & DR, for the Respondent ORDER I have the privilege of perusing the draft of the order prepared by my colleague. With utmost respect, I must say that I am unable to persuade myself to agree to the same. I, therefore, record my reasons separately. 2. Heard at length the learned Counsel for the appellants and Joint CDR and DR for the respondent. Also perused the written submissions filed on behalf of the appellants. 3. Suffice to summarize the case against the appellants as under:- M/s. Kuber Tobacco Products (P) Ltd. were engaged in manufacture of Gutka/Pan Masala bearing brand name KUBER, MOOLCHAND etc. classifiable under Tariff Heading 2106.00, and are hereinafter called as KTPPL . M/s. Kuber International (India), now known as M/s. Kuber Khaini Pvt. Ltd., were engaged in manufacture of Chewing Tobacco and Jet brand Khaini classifiable under Tariff Heading No. 2404.00, and hereinafter called as KI . Pursuant to information received that the appellants were indulging in clandestine removal of goods and evasion of duty, the investigating agency of the revenue department conducted search on 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andestine removal of goods against the appellants on the basis of capacity of machines installed by the appellants in their factory, the electricity generated by gensets, number of labourers employed by the appellants in the factory and raw materials consumed during the relevant period. All the findings in these regards have been arrived at essentially on the basis of statements of the deponents read with contents of hisaba book, kachcha challans, loose sheets and GRs of the transporters stated to have been recovered in the course of investigation. 5. The findings arrived at by the Commissioner in the impugned orders can be preciously summarized as below. The total number of machines installed were 137 and as per the letter of Chairman of the Board each machine could manufacture 200 pouches per minute and therefore 137 machines could manufacture 27,74,25,000 pouches per month, and all the machines having utilized in three shifts for 25 days in a month, the total production would be 832275000 pouches per month. Therefore, as regards KTPPL is concerned, for the period of 14 months from 07.05.1997 to 30.06.98, the total production ought to have been 1165 crores of pouches i.e. 88257 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to hold the charge of clandestine removal having been established against the appellants. All the contentions which were sought to be raised against the said documents including contention regarding illegality of the panchnama and seizure proceedings have been rejected by the Commissioner. While rejecting the said contentions, it has been observed by the Commissioner that it is not the job of the department to prove that the panchas were respectable or not. It has also been stated that it is surprising that the tax evaders are challenging the responsibility of the common person who witnesses the search proceedings. Failure to record the time of commencement and conclusion of search has been held to be a technical lapse. Non seizure of the key of the premises has been held to be not relevant for the decision in the matter. It has also been held that Shri Shubh Karan Bothra was present at the premises at the time of search. It has been held that the keys of the premises were brought by Shri Bothra and the documents were recovered in the presence of Shri Bothra and independent witnesses. It has also been observed that Shri Bothra had stated in the course of panchnama that the premis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of presumptions and assumptions. 9. In Bute Cosmetics vs. CCE, Trichy reported in 2001 (135) ELT 886, the Tribunal had observed that in modus operandi concerning suppressed production and clandestine clearances, the persons concerned may not keep any record of receipt of raw materials purchased normally through cash payments. Therefore, absence of any evidence alone on this point, ipso facto, cannot rule out clandestine removal. The Department, therefore, has to establish by preponderance of probability that the goods were clandestinely removed. 10. The challenge to the impugned orders essentially relates to absence of cogent evidence in support of the charge against the appellants relating to clandestine removal of the goods, failure on the part of the Department to adduce satisfactory evidence in support of such charge and the findings having been arrived at by the authority in the absence of evidence in support thereto. The main grievance is that the findings are not borne out from the records but are merely presumptions and assumptions sought to be drawn even in the absence of materials on record remotely suggesting such findings. 11. It can hardly be disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there can be no room to doubt about the genuineness of the document or about the genuineness of the contents of such document, and of course, the seizure thereof. 14. In the matter in hand, the seizure of the documents was under panchnama dated 9.10.1998. The said panchnama and the annexure thereto read as under:- Panchnama dated 9.10.98 Pancha No. 1 Shri Devindra Kumar Bajaj S/o Chaman Lal Bajaj R/o B-54, Vijay Nagar Delhi-9 Pancha No. 2 Sh. Dev Raj Baweja S/o Shri Ramasra Baweja R/o E-13, Mansarovar Garden New Delhi. We the above named Panchas on being called by the officers of Anti Evasion Branch, Central Excise Commissionerate Delhi-I, New Delhi presented ourselves at 4130, Gali Barua, Sadar Bazar Delhi to witness the Central Excise proceedings on 9.10.98. The visiting officers called Sh. Shubh Karan Bothra, authorised signatory of M/s Kuber Tobacco Products Pvt. Ltd. Siraspur Delhi. Sh. Shubh Karan Bothra reached at the above said premises and informed the officers that they are using three rooms of the above said premises as their and opened the locks of the rooms in our presence. Suraj Prakash Inspector, Central Excise (A.E.) Delhi-I showed the search w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed intentionally or otherwise. The panchnama does not describe the premises or the location of the premises with reference to the neighboring surroundings. The panchnama does not describe the interior of the premises nor it specifies the location of the three rooms viz-a-viz the entire building as well as that of the documents alleged to have been found in the premises. The panchanama does not disclose the number of accesses available to the premises and whether the premises were accessible or not from any of those accesses before unlocking the rooms. There is no description of the entire building in which the three rooms, which were allegedly used as the guest house, were situated. The description merely states three rooms of the said premises . In other words, the premises bearing No. 4130 are not only having three rooms but there are more rooms to the said premises. The panchnama has to be specific and clear about the location and the description of the premises irrespective of the fact whether it is in the course of criminal investigation or tax evasion investigation. 16. The panchnama also does not disclose as to who had found the documents in question and where exactly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panchnama merely records that the officers on search found certain records. It does not give the description of the so-called records except saying that the same are described in Annexure A . All this information was absolutely necessary to give credibility to the panchanam, particularly when the entire proceedings in that regard are sought to be challenged and disputed. 20. Undoubtedly, there is a Annexure A stated to be giving details of the record found. However, bare perusal of the said annexure would disclose that the same does not give any sort of details of the documents stated to have been found in the premises. One Saraswat duplicate book or attendance register cannot be said to disclose the details of the identity of the document. It does not disclose what sorts of the book it is. It does not disclose whose attendance register it was. The photocopies of bank passbook are stated to be 51 in numbers. However, whose account books were they, what was the account number, by which bank they were issued, for what period they related to? Nothing has been stated. 21. A panchanama is a record of the things visually perceived or actually experience by the panchas in the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of such steps being taken in the course of seizure of the articles or documents, certainly the credibility of not only of the seizure and recovery but of the material seized and recovered can also be doubted. It is also necessary to record not only the description of the premises but also the movement of the officers and the panchas searching the premises and every relevant action of every such person has to be precisely recorded in the panchnama to avoid any doubt about the seizure proceedings. None of such precautions were taken in the cases in hand. 23. In the above circumstances, it is the contention on behalf of the appellants that since the seizure itself was illegal, the recovery stands vitiated and, therefore, nothing recovered can be considered as relevant material to substantiate the charge against them. However, this contention to be canvassed cannot be accepted. It is well settled that the rules of evidence as they are in force in this country do not exclude relevant material on the ground that it was obtained by illegal search and seizure. The evidentiary value of such material is to be ascertained and assessed irrespective of illegality in the search and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Albeit, the relevancy thereof can be certainly questioned. 26. As already pointed out above, it should not be forgotten that the charge of clandestine removal of goods connotes accusation of serious nature and, therefore, requires to be established with cogent evidence. If proved, it can have drastic consequences. Besides, a fair proceedings, with no opportunity to the prosecuting agency to gain advantage of its own wrong or lapse, is the corner stone of our justice system. At the same time, the other side of the coin is that the white colour offenders particularly those defrauding the public exchequer cannot be allowed to enjoy the booty collected by them by taking undue advantage of their own failure or perhaps mischief. It is, therefore, necessary to strike proper balance and that is why the Apex Court in State of Himachal Pradesh vs. Priti Chand and Another reported in 1996 (2) SCC 37, Radha Kishan vs. State of U.P. reported in AIR 1963 (SC 823 and State of Maharashtra vs. Natwar Lal Damodar Das Soni reported in 1980 (4) SCC 669, has ruled that the evidence obtained even by illegal search and seizure should not be discarded totally but should be scrutinized and examined caref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard. Besides, the statement does not clarify the expression their In the circumstances the said statement by itself cannot be of any help to the department to establish link between the appellants and the said premises. It is also contended that the premises 4130 belong to the appellants has been admitted by Shri Moolchand Maloo in his statement. About the alleged admission and the statement of Shri Moolchand Maloo is concerned, it would be dealt with separately herein below. 29. Reverting to the point relating to the documents stated to have been seized in the course of panchnama, admittedly, the author or authors thereof has/have not been identified, nor examined. Once it is not in dispute that the documents were recovered and seized from the premises other than the appellant s factory premises, it was absolutely necessary for the department to establish that the premises in question were in possession of the appellants at the relevant time. As pointed out above, undoubtedly, the panchanama discloses that the locks of the premises were opened by Shri Bothra, the employee of the appellants. However, it has not been established that the keys of the premises were in possession of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kachha challan and loose sheet. Perusal of the Annexure A to the said panchnama however discloses no reference to any hisaba book or kachha challan. The said annexure does not enlist any hisaba book or kachha challan therein. The description of the materials stated to have been seized from the said premises under the said panchnama and described in the Annexure A to the said panchnama do not include any hisaba book or kachha challan. Being so, one wonders whether these were the very documents which were seized from the said premises? If not, how and from where these documents were recovered? We have no clue either from the records before us or from the impugned order in that regard. In the absence of this vital information, we fail to understand as to how these documents can be of any help to establish the charge of clandestine removal of the goods by the appellants, and that to by applying the curious methodology of two digit reduction theory applied by the department without disclosing any basis for such theory. 33. As regards the loose sheets, undoubtedly, the Annexure A to the said panchnama makes reference to one folder containing loose bahi papers and one loose paper file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly such material cannot be of any relevancy. In the case in hand, on account of various legal and procedural infirmities in the panchnama proceedings noted above, it is apparent that the entire proceedings have lost their credibility and serious doubt arises even about the credibility of the materials stated to have been collected in the course of such proceedings. 36. It is, however, stated that documentary evidence stand corroborated by admission on the part of Moolchand and Vikas in their statements which were recorded on 17.11.1998. The impugned order further discloses that the said statements were sought to be retracted on 04.12.1998, however, the Commissioner has rejected the retraction on the ground of delay. 37 In Shiv Shakti Steel Tubes vs. CCE reported in 2008 (221) ELT 166 it was held by the Hon ble Punjab & Haryana High Court that the statement to a custom officer can be relied upon and can be used against the makers of the statement as long as it is not hit by any of the defects envisaged by Section 24 of Evidence Act, 1872. A statement containing self exculpatory matter cannot amount to a confession of any wrong doing because of an exculpatory material is of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is admitted need not be proved. 40. In the case in hand, not only that the statements were sought to be retracted by the parties, as already observed above, the contents of such alleged admission do not relate to any of the documents stated to have been recovered under the panchnama. In the absence of link between the documents which are sought to be relied upon in support of the accusation of clandestine removal of goods and those documents which are stated to have been recovered in the course of panchnama, the accusation does not stand proved, equally so in relation to alleged admission in the said statements. 41. There is yet another peculiar aspect of the said statements. Perusal of the statements of Sh. Moolchand disclose that the same was stated to have been written by his son Sh. Vikas Maloo at the request of his father. In other words, it is in the handwriting of said Sh. Vikas Maloo. Prior to the signature of the party at the end of the statement, it has been recorded therein that the statement is given by deponent voluntary without any duress, force or enducement and that the statement is that of the deponent and it is correct statement given by him. Similar is the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peaks of opening of a lock of the premises by him. The statement nowhere states that the key of the premises was with the deponent. On the contrary, the statements specifically states that the custom officers were already present at the premises. It is pertinent to note that the statement was recorded on the very day on which the panchnama was conducted. The statement also does not disclose the description of the such documents stated to have been recovered and /or seized by the department from the said premises. The statement speaks of use of premises for residence of certain persons on the line of guest house but does not disclose the premises having been used by the appellants or their company as its guest house. Obviously, therefore, the statement of Shri Bothra also can not lend any support to the case of the department. 45. Any statement before being accepted as admission of a fact has to be examined to ascertain what is its imports and then to determine what weight it should be attached to the same. The Apex Court in Nagubai Ammal and Others vs. B. Shama Rao & Other reported in AIR 1956 SC 593 had ruled that an admission is not conclusive as to the truth of the matters sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosing its utilization. Learned Commissioner has clearly observed in the impugned order that there is no evidence of purchase of major raw materials like supari, tobacco etc even in the loose sheets. In other words, the department could not bring any evidence about procurement of raw materials sufficient to manufacture the final product of the quantity which is alleged to have been clandestinely removed. 50. Similar is the case in relation to the sale of the clandestinely removed goods. Admittedly, there is no material on record which could establish sale of the clandestinely removed goods. Neither the transporters have supported any such claim nor the suppliers have established the said allegation. 51. Undisputedly, the working of the machines in the appellants factory was not tested or certified to ascertain the production capacity of the said machines. There is no panchnama drawn to ascertain how many machines in the factory of the appellants were in working condition or where actually working and what was the production capacity of each of those machines. No records were available to hold that the appellants were working in three shifts. It was for the department to asce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct proper evidence to establish the said fact by collecting cogent evidence regarding the actual production in the appellants factory. 53. The appellants are also justified in making grievance about the failure on the part of the respondent to collect any evidence in relation to either procurement of raw materials by the appellants or sale of final goods so as to justify the allegation against the appellants about clandestine removal of huge quantity of the final product within a short span of time. Admittedly, there was no verification of the capacity of the machines to produce the total quantity per day. Calculation in that regard has been arrived at merely on the basis of some assumption and not on actual verification of the machines. Inspite of repeated contention sought to be raised by the Advocate for the appellants in that regard, the respondent could not point out anything from the records which could convince us to reject the said contention on behalf of the appellants. 54. As regards the entries made regarding raw materials in the loose sheets, it has been stated that the complete addresses of raw material suppliers were not given, however, the names thereof were give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was hand writing examination done nor the necessary evidence to establish the link between the said hand writing and that of any of the employees of the appellants has been placed on record. 57. As rightly pointed out by the Advocate for the appellants, any kachcha records to be made a part of the evidence, the same need to be corroborated by cogent evidence and in the absence thereof, the private records by themselves do not transform into reliable evidence. There is absolutely no corroboration in any manner of the entries in Hisaba Book or loose sheets or kachcha challans. 58. The efforts on the part of the Commissioner to link the said entries to the production of clearance of the goods from the appellants factory as rightly submitted are based on purely presumptions and assumptions without any tangible evidence to support the conclusions sought to be arrived at in that regard. 59. There is no evidence collected as regards the number of shifts the machine might have been used in the factory of the appellants. The conclusion in that regard has been sought to be made merely on assumption. It was to the knowledge of the Commissioner that it was dealing on serious charge of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a large quantity of diesel within 20 days. In relation to 380 KVA for normal shift of 8 hours a day, the consumption of diesel would be 280L. Considering the same for 20 days, it cannot exceed 5,600 L. As regards 200 KVA for normal shift of 8 hours, it would consume 180 L and accordingly for 20 days it cannot exceed the consumption of 3,200 L. Being so, by no stretch of imagination, the appellants could have consumed 29,600 L of diesel within 20 days. The contention of the appellants in this regard is certainly well founded in the facts and circumstances of the case. 63. If however, defiance of law and procedure leaves scope for tempering with the material seized, then certainly such material cannot be of any relevancy. In the case in hand, on account of various legal and procedural infirmities in the panchnama proceedings noted above, it is apparent that the entire proceedings have lost their credibility and serious doubt arises about the credibility of the materials stated to have been collected in the coruse of such proceedings. 64. In Ganga Rubber Industries vs. CCE reported in 1989 (39) ELT 650, it was held that it is for the Department to establish that the entries in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loose sheets reflected removal of goods from the factory in a clandestine manner. As a matter of fact, there were three godowns of the assessee which were identified during search of the premises and it was found that several machines manufacturing gutkha and pouches were actually not in use. 70. In CCE, Hyderabad vs. Vanifab Engineers Pvt. Ltd. reported in 2006 (206) ELT 893, the Tribunal held that in the absence of any statement from any person from the factory to prove that there has been excess production and clearance of the goods without payment of duty and in the absence of any other evidence , the proceedings on charge of clandestine removal of the goods are liable to be quashed. 71. In Laxmi Engg. Works vs. CCE, Delhi & Anr. reported in 2001 (98) ECR 273, it was held that in the absence of cross-examination of witnesses and the recovery of slip pads, loose papers and register from the factory premises having not proved by the independent witnesses, the charge of clandestine removal was not established. 72. In CCE, Bangalore vs. Jindal Aluminium Ltd. reported in 1998 (29) RLT 183 (CEGAT) it was held that the allegation of clandestine removal based on transporter s cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the statement of the labour contractor and his partner as also considering the volume of power consumption. On facts, the case is clearly distinguishable. 78. In Sharma Chemicals vs. Commissioner of C. Ex. Calcutta-II reported in 2001 (130) ELT 271 (Tri. Kolkata) the note book entries of production and removal of products recovered from a person whose name was appearing in the list of the workers in statutory records cannot be of any relevancy to establish the charge of clandestine manufacture and removal. Such a charge cannot be sustained on presumption that the persons entrusted with such job are not usually shown as employees. The entries in private note book of record of production at the most may raise a doubt but can not be a proof of the charge in the absence of other corroborative evidence like installed capacity of factory, raw materials utilization, labour employed, power consumed, goods actually manufactured and packed etc. 79. In T.M. Industries vs. Collector of Central Excise reported in 1993 (68) ELT 807 (Tribunal) it was held that in cases where charge of clandestine removal is to be established on private records genuineness thereof is disputed and authe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 such major raw materials. In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of corroborative evidence, a finding cannot be based on the contents of loose sheets of uncertain authorship. Failure on the part of the department to produce evidence of use of inputs to prove that there was manufacture of unaccounted finished product, absence of statements disclosing the source of procurement of the raw materials, absence of evidence regarding use of electricity or receipt of sale consideration by the assessee would establish failure on the part of department to bring home the charge of clandestine removal by the manufacturer. 85. In Opel Alloys (P) Ltd., vs. Commissioner of Central Excise, Ghaziabad reported in 2005 (182) ELT 64 (Tri. Del.) the department had not identified the person or persons who had maintained the records seized by the department, there was no statement of any employee in support of any of the allegations against the assessee, statements recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90. In the result, the appeals are bound to succeed. The impugned orders are liable to be set aside with consequential relief. Accordingly, I allow the appeals and set aside the impugned orders. ORDER Per: Shri Rakesh Kumar: 91. Since common questions of law and facts arise in all these appeals, the same were heard together and are being disposed of by a common order. The facts leading to filing of these appeals are, in brief, as under:- 91.1 M/s. Kuber Tobacco Products Pvt. Ltd. (hereinafter referred to as KTPPL ) having its registered office at 3909, Gali Barna, Sazar Bazaar, Delhi, is a Private Limited Company, whose Directors are Shri Mool Chand Malu and his son, Shri Vikas Malu. M/s. Kuber International Ltd. (hereinafter referred to as KI and now called as Kuber International Pvt. Ltd.) having its registered office at 3909, Gali Barna, Sadar Bazar, Delhi is also a Private Limited Company, whose Directors are Shri Moolchand Malu and his son, Vikash Malu. While KTPPL have manufacturing units at 31K, Siraspur, Delhi ( Unit I), 34 K, Siraspur, Delhi (now closed) and 173, 174K Siraspur (Unit-II), Delhi, where Gutka/Pan of Moolchand brand is manufactured, KI have manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were placed under seizure. 91.5 As regards search of premises at 5987, Plot No.83, South Nawab Road, Basti Harphool Singh, Delhi, blank invoice/bill books of four companies were recovered:- (1) M/s. Rishi Trading Co., Gali Pahad Wali, Sadar Bazar, Delhi-6. (2) M/s.Swastik Trading Co., 1464, Qutab Road, Sadar Bazar, Delhi-6. (3) M/s.Shyam Tobacco Co., 6468-B, Basti Harphool Singh, Sadar Bazar, Delhi-6. (4) M/s. Shukla Enterprises, 2861, Bagichi Raghunath, Sadar Bazar, Delhi-6. At these premises, one Shri Ravi Kumar Duggar, Accountant of KTC was present. 91.6 From 463, G.F. Pocket-A, Sarita Vihar, New Delhi, no incriminating documents were recovered. 91.7 Shri Subh Karan Bothra of M/s. KTPPL was present at the time of search of the premises of KTPPL at 3909, Gali Barna, Sadar Bazar, Delhi. Subsequently, when the officers team reached at the premises at 4130, Gali Barna, Sadar Bazar, Delhi for search of the premises, it was found locked and Shri Subh Karan Bothra was called at this premises. He came to this premises and in presence of two panch witnesses, he opened the lock and was present thorough out the search of the premises. At that time, he stated that this pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aqua Minerals Ltd. M/s. Kuber Grains & Spices Pvt. Ltd., M/s. Green Valley Resorts Ltd., M/s. Blooming Dale Pvt. Ltd., and M/s. Kuber Globals Pvt. Ltd., that M/s. KTPPL were having their factories for manufacture of Gutka and chewing tobaco of Mool Chand brand and kuber brand, that Shri C.S. Baid was of his employee, who was in charge of purchase of raw materials and manufacture of finished goods and their despatch; that the payments for the purchase of the raw materials were being made by him or Shri Vikas Malu, that Shri C.S. Baid reported directly to the Directors i.e. himself or in his absence to his son, that for the purpose of marketing of the finished goods, Shri Mukesh Kapoor was the incharge, who received the purchase orders from the buyers and conveyed them to Shri C.S. Baid for despatching the finished goods, that Shri Baid reported directly to Shri Mool Chand Malu and his son, that in the absence of Shri Mukesh Kapoor, the purchase orders were also received by Shri C.S. Baid, that Shri R.P. Sharma assists Shri Baid and central excise invoices are prepared and signed by Shri Sharma, that Shri Sharma was also responsible for depositing the duty on the goods cleared, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi and stating that the same pertained to KTPPL and KI, he further stated that the books at sl.no.8, 9, 10, 12, 16, 17, 18, 19 and 20 were the carbon copies of the kachcha challans in respect of the goods sold to various distributors, that these kachcha challans have been mainly prepared / written by his employee Shri Kishan Sharma, that the books against sl.no.11, 13, 14 and 15 were the kachcha accounts and at sl. nos. 14 and 15 (Hisaba books) contain partywise accounts of sales and receipt of the payments, that these books had also mostly been written by Shri Kishan Sharma, and in some cases by Shri Umed that most of the consignments covered under kachcha challans and mentioned in the hisaba books had been cleared without payment of duty, and that he was ready to make the payment of duty on the goods, which were cleared without payment of duty. Shri Vikas Malu in his statement dated 17.11.98 recorded under Section 14 of the Act, accepting that the documents recovered from premises at 4130, Gali Barna, Sadar Bazar, Delhi pertained to KTPPL and KI corroborated the statement of Shri Mool Chand Malu. Shri Vikas Malu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kapoor and his wife Mrs. Saroj Kapoor were owning two firms M/s. Ganpati Agencies (GA) and M/s. Ganpati Marketing Co. (GMC), and that Shri Subh Karan Bothra was looking general administration of the office at 3909, Gali Barna, Sadar Bazar, Delhi and he was also looking after the receipt of payments from the buyers. 91.12 The statements of Shri Mukesh Kapoor, his wife, Smt. Saroj Kapoor, and Shri Gowri Shankar Khattar were also recorded wherein they accepted that they were marketing the Gutka and Khaini manufactured by KTPPL and KI . 91.13 On study of kachcha challans, it was found that each kachcha challan contained the details like the name of the buyer (Distributor), the total quantity sold, quantity sold under the invoice, value, mode of the transport and the name of the transport company, if the transportation by road and along with GR/RR nos. All the sales in respect of which kachcha challans had been issued were found reflected in kachcha accounts called Hisaba books (Book No.14 and 15 of the Annexure to the Panchnama of the search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi). 91.14 Inquiries were made with the transport companies mentioned in the kachcha ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooking to the number of machines and capacity of the machines, it appeared that KTPPL and KI had capacity to manufacture the quantity of the Gutka and Khaini which had been sold under the kachcha challans. It is on this basis that the following two show cause notices were issued to KTPPL and KI and other noticees. 91.15.1 A show cause notice dated 31.07.2000 was issued to KTPPL and others for (a) recovery of allegedly short paid central excise duty amounting to Rs.11,99,33,571/- from M/s.KTPPL chargeable on the goods valued at Rs.29,95,79,744/- cleared clandestinely without payment of duty during the period from 1.8.95 to 28.02.97 under Rule 9(2) of the Central Excise Rules read with proviso to Section 11 A (1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate as per the provisions of Section 11 AB ibid 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 1.8.1995 to 5.10.98, as detailed in the show cause notice and recovery of differential duty amounting to Rs.45,45,084/- in respect of these clearances under Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 9(2) read with Section 11 AC and Rule 173 Q of Rules, 1944 and also under Rule 226 of the Central Excise Act read with Section 11 AC of the Central Excise Act, 1944; and; (e) Imposition of penalty under Rule 209 A of the Central Excise Act, 1944 on Shri Vikas Malu, Mool Chand Malu, Shri C.S. Baid, Shri Subh Karan Bothr,.Shri Mukesh Kapoor of M/s. Ganparti Agencies and M/s. Ganpati Mktg. Co. Shri Gowri Shankar Khattar of Delhi Mktg. Co. and M/s. New Delhi Mktg. Co., Shri P. Vishwanath of M/s. Mookambica Agencies, Shri Akhay Chand Kothari of M/s. Kothari Agencies and Shri Jarnail Singh, Shri Harmit Singh, Shri Harpal Singh of M/s. RKRT Goods Carriers 91.16 Show cause notice dated 31.07.2000 issued to M/s. KTPPL was adjudicated by the Commissioner of Central Excise, Delhi vide order-in-original no.59/05 dated 30.12.2005 by which (a) total duty demand of Rs.12,05,40,439/- on account of clandestine removal and undervaluation was confirmed against M/s. KTPPL under proviso to Section 11 A(1) of the Central Excise Act, along with interest on this duty at the applicable rate under Section 11 AB ibid, and an amount of Rs. 2 Crores already paid during investigation was appropriated to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Shri S.K. Bothra Rs.40 Lakhs (iv) Shri Mukesh Kapoor Rs.50 lakhs (v) Shri G.S. Khattar Rs.50 Lakhs (vi) Shri Akhay Chand Kothari Rs.20 Lakhs (vii) Shri Jarnail Singh Rs.2 Lakh Shri Harmit Singh, Shri Harpal each Singh of M/s. RKRT Road Carriers (viii) Shri Devjee Bhai Rs.20 Lakhs (ix) Shri P. Vishwanath no penalty M.K. Agencies. Against the above order of the Commissioner, the appeal NO.E/2039 to 2050/2006 have been filed. 92. Heard both the sides. 92.1 Shri A. Hidayatullah, Advocate, ld. Senior Counsel appearing for the appellants, pleaded that the adjudicating authority has not complied with the basic principles of natural justice inasmuch as the cross examination of the persons, whose statements were recorded and relied upon was denied, that the decision in the matter against the appellants inspite of failure on the part of the department to discharge the burden of proof has clearly rendered the orders bad in law, that conjectures and surmises cannot take the place of the proof, that both the orders under challenge are based on assumptions and presumptions without ascertaining as to whether the department has discharged its burden to prove the case against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were capable of running the machines for the period which the department alleges, that Shri Mool Chand Malu and Shri Vikas Malu had retracted their statements and hence their statements are of no evidentiary value, that as stated by Shri Subh Karan Bothra at the time of cross examination, he was not present at the time of search of the premises at 4130, Gali Barna, Sadar Bazar, Delh, that in view of these circumstances, without any corroborative evidence on record, merely on the basis of kachcha challans, loose sheets and hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi, the duty demands against the appellants and penalty on KTPPL and KI and other firms and persons is not sustainable, that in this regard, reliance is placed on the judgement of the Tribunal in the case of CCE, Hyderabad-V Vs. Vani Fab. Engg. Reported in 2006 (205) ELT 893, that the Tribunal in the case of Durga Trading Company Vs. CCE, Lucknow reported in 2002 (148) ELT 967 has held that charge of clandestine removal and manufacture of dutiable goods and removal thereof without discharging duty liability can not be established on assumptions and presumptions and such charge has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh flow is concerned, there is clear admission in this regard by the appellants, that there is no materials brought on record to show that any part of the seized documents were tampered with or there was any interpolations, that the admitted facts need not be proved and in this regard, reliance is placed on the decisions in the matters of P.K.Ravindran reported in 2003 (156) ELT 182 (Madras High Court), Khet Singh Vs. Union of India reported in 2002 (142) ELT 13 (SC), CCE, Madras Vs. Systems & Communications Pvt. Ltd. reported in 2004 (165) ELT 136, Bute Cosmetics Vs. CCE, Trichy reported in 2001 (135) ELT 886, Columbia Electronics Vs. CCE, Trichy reported in 2002 (143) ELT 635, Dy. Director of Enforcement Vs. AM Cease reported in 1999 (113) ELT 804, Shiv Shakti Steel Tubes Vs. CCE reported in 2008 (221) ELT 166, M.R. Tobacco Pvt. Ltd. Vs. CC, Delhi reported in 2006 (202) ELT 64 and Radhe Shyam Kanoria Vs. CC, Thane-II reported in 2006 (197) ELT 130 (Mum.), that order-in-original no.159/05 dated 30.12.2005 and order-in-original no.3/06 dated 30.01.2006 describe detail of the modus operandi adopted by KTPPL and KI for evasion of duty and the same is clearly confirmed from the perusa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of search of the appellant s premises, the appellant had no grievances against Shri Umesh Chandalia. Summarising his arguments, Shri B.K. Singh, ld. Departmental Representative pleaded that (a) the plea that the department s case is based on assumptions and presumptions is not tenable, as the entire case is based on documentary evidence in form of loose sheets, kachcha challan books and partywise kachcha accounts (Hisaba books) recovered from the appellant s premises at 4130, Gali Barna, Sadar Bazar, Delhi and also the documents recovered from the transport companies; and inquiry with the consignees, (b) Besides this, the seizure of the huge unaccounted stock of Mool Chand brand Gutka at the premises of KTPPL on 9.10.98 is a clear evidence of unaccounted production and clandestine clearance by the appellant; (c) all the documents recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi pertain to KTPPL and KI and these documents are a clear evidence of large scale duty evasion by KTPPL and KI and these documents cannot be discarded even if the search of the premises is held to be illegal and in this regard, reliance is placed on Hon ble Supreme Court s judgement in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR, therefore, pleaded that there is no infirmity in the impugned order. 92.3 Shri H. Hidayattullah, the ld. Sr. Counsel in rejoinder pleaded that to prove clandestine removal, receipt/purchase of the raw materials, unaccounted manufacture of finished goods and clandestine removal is required to be proved and if one of these links is missing, the charge of clandestine removal would not be sustainable, that in this case, no inquiry has been made with the workers of the factory regarding the actual production, that the Tribunal in the case of Radheshyam Kanoria Vs. CCE Para 17 reported in 2006 (197) ELT 130 (T) has held that for proving the clandestine removal, unaccounted production must be established and that in this case, there is no evidence of purchase of raw materials or production of unaccounted gutka and khaini. He once again emphasised that the search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi is illegal, that the Annexures to the Panchanama have not been signed by Shri Bothra and that there are interpolations and corrections in the kachcha challans which shows that the same are not genuine documents and hence not reliable. 92.4 Shri B.K. Singh, ld. DR repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, mode of transport, RR nos. in case of dispatch by railways and GR nos. in case of dispatch by road, transport company s name etc. On the basis of kachcha challans, the partywise accounts in the hisaba books had been prepared, as all the sales in kachcha challans are reflected in hisaba books. The loose papers in folder at S.No.2 contain daily sheets regarding clearance of finished goods by KTPPL and KI, on the basis of which kachcha challans are prepared, and papers containing purchase of raw material like tobacco, plastic lamination and diesel for running generator during certain period. The main contention of the appellants is that these documents are invalid and cannot be considered as evidence, as the search of these premises is illegal in asmuch as (a) the Panchnama does not mention the time when the search was started and when the search was completed, (b) it does not mention as to who brought the keys to the premises, (c) Panchnama does not mention the exact description of the premises, and exact place in the premises from where the documents were recovered, (d) the panchnama was written in English, and as per the panchnama, the same had been only read over and explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of search and completion of the search, it would not make the search invalid. Moreover, we also find that Shri Shubh Karan Bothra in his statement dated 9.10.98 had clearly admitted that the premises at 4130, Gali Barana, Sadar Bazar, Delhi is being used as guest house of the company and the documents recovered from these premises pertained to KTPPL and KI. Besides this, Shri Mool Chand Maloo and Shri Vikas Maloo in their statement dated 17.11.98 have not only clearly admitted that the premises at 4130, Gali Barna, Sadar Bazar, Delhi was being used as guest house and records recovered from these documents pertained to KTPPL and KI, they also explained about the nature of documents and also named the person who had prepared kachcha challans and Hisaba books. Though Shri Bothra subsequently retracted his statement dated 9.10.98 claiming that he was working for M/s. KTC only and had no concern with KTPPL or KI and at the time of his cross examination during adjudication proceeding, he claimed that he was not even present at the time of search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi, his retraction, being bald and belated retraction, without any supporting evidence i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly members and their presence at this premises clearly indicates that this premises was under their control. As mentioned above, Shri Mool Chand Malu and Shri Vikas Malu in their statement dated 17.11.2000 recorded under Section 14 of the Central Excise Act, 1944 have stated that the premises at 4130, Gali Barna, Sadar Bazar, Delhi was being used as their guest house and the records recovered from this premises pertain to KTPPL and KI. Though the statement dated 17.11.98 of Shri Mool Chand Maloo and Vikas Maloo have been retracted by them, we find that these retractions carry no weight at all for the reasons given below:- (1) These retractions had been sent by post and had been received by the investigating officers after about 17 days and are mere bland retractions, without any evidence, in support of their claim, that the statement had been given by them under threat, coercion or inducement. As held by the Tribunal in the case of Colmbia Electronics (supra) belated retractions have no meanings. (2) The Hon ble Supreme Court in the case of K.T.M.S. Mohd. Vs. Union of India reported in 1992 (3) SCC 178 (para 31) has held that if the officers of the Enforcement intend to take th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the making of the confession was caused by any inducement, threat or promise proceeding from a person in authenticity, the confession is liable to be excluded from evidence, that the expression appears in Section 24 of the Evidence Act connotes that the court need not go to the extent of holding that the threat etc. has to be proved beyond doubt and that if the facts and circumstances emerging from the evidence adduced make it reasonably probable that the confession could be the result of threat, inducement or pressure, the court will refrain from acting on such confession, even if it be a confession made to a Magistrate or a person other than police officer. Relying upon the two judgements, the Hon ble Court in a recent judgement in the case of Vinod Solanki Vs. Union of India reported in 2009 (233) ELT 157 (SC) held that since the allegation of detention of the appellant for two days and two nights has not been denied by the department, the retraction by the appellant cannot be said to be a bald retraction and hence the statement of the appellant would not be admissible as evidence. Examining this case in the light of the above judgement of the Apex Court, we find that (a) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s both Shri Mool Chand Malu and Vikas Malu had stated that these documents had been mostly written by Shri Kishan Sharma and Shri Umed Jain. Though the investigating officer summoned both these persons, they have not appeared before the officers, may be under the pressure of the appellants. Therefore, just because the statements of Shri Kishan Sharma and Shri Umed Jain have could not be recorded, the authenticity of the loose sheets, kachcha challan books and the hisaba books cannot be doubted. 4.2.2 Another plea of the appellant is that the documents loose sheets, kachcha challan books and hisaba books seized from the premises at 4130, Gali Barna, Sadar Bazar, Delhi had been planted by one of their employee, Shri Umed Chandelia against whom an FIR has been lodged by Sh. Vikas Malu for mi-appropriation of the money. But this FIR had been lodged during 1999 while the search had taken placed in October, 1998. Therefore, the plea that Shri Umed Chandelia, on account of enmity with Shri Mool Chand Malu and Shri Vikas Malu had planted certain documents at 4130, Gali Barna, Sadar Bazar, Delhi is not tenable. 94.3 In view of the above discussions, we hold that (a) the documents listed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and clearances given to him by Shri C.S. Baid and that he never verified the figures given to him by Shri Baid to be entered in the RG-I Register. (4) Loose sheets, kachcha challan books and hisaba books seized from the premises at 4130, Gali Barna, Delhi. While kachcha challan books contain the details of the each clearance, the hisaba books contain partywise accounts of the sale of the finished goods. In respect of a larger number of clearances for which kachcha challans have been issued, there are no central excise invoice while in respect of some kachcha challans, invoices have been issued. In some cases where kachcha challans mention invoice having been issued only for a part quantity, the invoices are found only for that quantity. In some cases where the invoices have been issued, the value of the goods shown is much lower than the value mentioned in the kachcha challan books which shows that in such cases deliberately low value was being shown in the invoices to evade the taxes. Loose papers contained the detail of clearances of gutka and khaini by M/s KTPPL and KI during 10.06.1998 to 30.06.1998 period and also the details of purchase of raw materials like tobacco (373 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi) show unaccounted purchase of 16383.1 kgs. of plastic lamination, 37330 kgs. of tobacco during just 20 days period from 11.06.98 to 30.06.98 and while this quantity of lamination and tobacco is sufficient for making lakhs of pouches of gutka and khaini, the production of gutka and khaini recorded by KTPPL and KI during this period is a small fraction of this. The loose sheets also disclose purchase of 29600 ltrs. of diesel during 11.06.98 to 30.06.98. Since DG set consumed 55 ltrs. of diesel per hour there was sufficient diesel to manufacture huge quantity of goods by KTPPL & KI. In view of this, the appellant s plea that the department s case is based on assumptions and presumptions is difficult to accept. 95.2 This Tribunal in case of Sai Chemicals Pvt. Ltd. Vs. CCE reported in 2010 (257) ELT 457 has, on the question of burden of proof of clandestine clearances of excisable goods, held as under:- It is true that the respondent had not conducted any investigation in relation to buyers of such final product, nor in relation to the transporters, nor there is evidence collected in respect of electricity consumption as well as of any excess intake of raw materials. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Criminal Court is different from the standard of proof before the adjudicating authority where pre-ponderance of probability would be guiding factor and proof beyond reasonable doubt relevant in criminal prosecution before a Criminal Court cannot be bodily lifted and transplanted in adjudication proceedings where consideration of probabilities would be the guiding factors. Be that as it may, on consideration of the entire evidence available on record, we are clearly satisfied that the Contract TCF 1086, in question, was a fictitious and also amended contract to suit the convenience of the appellants, there was a motive on the part of the appellants to earn the foreign exchange illegally by not declaring the full export value of the goods in question in the Shipping Bill and in the G.R.1 form as required under Section 18(1) of FERA In fact, the adjudication proceedings for determining the duty liability and question of penalty for failure to discharge the duty liability are civil proceedings and not criminal proceedings and it is settled law that the standard of proof in civil proceedings is preponderance of probability. In this regard, the Hon ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oose sheets recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi show purchase, during just 20 days period from 11.6.98 to 30.06.98, 16383.1 Kgs. of plastic lamination, 37330 Kgs. of tobacco and 29600 ltr. of diesel for running of generators, which is sufficient for manufacture of huge quantity of Gutka and Khaini pouches. Moreover when, as discussed above, the premises at 4130, Gali Barna, Sadar Bazar, Delhi was under the control of Shri Mool Chand Malu and Shri Vikas Malu and from this premises, the loose sheets, kachcha challan books and hisaba books had been recovered which show huge clearances of finished goods without issue of central excise invoices and without payment of duty and the dispatch of the goods is also corroborated by the documents obtained from the transport companies and railways, in view of the judgement of the Tribunal in case of Sai Chemicals (supra) and also the judgement of the Hon ble Supreme Court in the case of Collector of Customs Vs. D. Bhoormal (supra), the initial burden of proof for establishing the allegation of removal of the goods without payment of duty can be said to have been discharged by the Department and the onus would, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Chaudhary Sales Corporation, All of them are dealers/distributors of KI and KTPPL. On going through the records, it is seen that all of them had received branded Gutka and branded Khaini cleared without payment of duty from KTPPL and KI and had sold the same. The provisions of Rule 209 A of Central Excise Rules, 1944 in respect of them would, therefore, be attracted and hence, penalty has been rightly imposed on them and as such, the same is upheld. However, looking to the volume of transaction the penalty on Shri G.S. Khattar, Shri pawan Kumar karnani, Shri Bhim Karan Jain in order dated 30.12.2005 and penalty on Shri G.S. Khattar and Shri A.C. Kothari in order dated 30.01.2006 is reduced as under:- Order-in-Original No.159/05 dated 30.12.2005 Shri G.S. Khattar Rs.5 Lakhs Shri Pawan Kumar Karnani Rs.7.5 Lakhs Shri Bhim Karan Jain Rs.7.5 Lakhs Order-in-Original No.3/06 dated 30.01.2006 Shri G.S. Khattar Rs.12.5 Lakhs Shri A.C. Kothari Rs. 5 Lakhs 97.1 As regards Shri Mahesh Kapoor, while penalty of Rs.20 Lakhs has been imposed on him vide order-in-original no.159/05 dated 30.12.2005, penalty of Rs.50 Lakhs has been imposed on him vide order-in-original no.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee with the findings of the Commissioner in para 71.3 of the order-in-original no. 159/05 dated 30.12.05 and para 63.3 of the order-in-original no.3/06 dated 30.01.06 that Shri Bothra and Shri C.S. Baid were working in tendem and Shri S.K. Bothra was also involved in the dispatch of the goods to consignees by showing fictitious names of the consignors. Thus, Shri Bothra has also dealt with the excisable goods which he knew were liable for confiscation and penalty on him has rightly been imposed under Rule 209 A of the Central Excise Rules. However, Since he is only an employee, the penalty of Rs.30 Lakhs imposed on him by order-in-original no.159/05 dated 30.12.2005 and penalty of Rs.40 Lakhs imposed on him vide order-in-original no.3/06 dated 30.01.2006 is excessive and as such, the same is reduced to Rs.2.5 Lakhs each. 97.4 As regards the imposition of penalty on the transporters viz. Jarnail Singh, Shri Harmit Singh and Shri Harpal Singh of RKRT Transport and Devji Bhai of Diomond Transport Companies, we find that there is no dispute that these transport companies had transported the goods cleared without payment of duty. On going through the records, we find that the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to sufficiency of evidence to support the charges against the assessee. The point for consideration is, therefore, whether the evidence on record is sufficient to prove the charges against the assessee as held by Hon'ble Member (Technical) or is not sufficient to sustain the charges against the assessee as held by Hon'ble President. 101. This order is passed pursuant to perusal of the order dated 12-5-2011 by the Hon'ble Member before whom the matter was placed. Registry to do the needful in the matter. ORDER 102 This matter was called out today for hearing Difference of opinion between the Hon'ble President and Hon'ble Member (Technical) which was referred to me. This difference of opinion was heard on 14th and 15th July 2011 and then on day to day basis from 17th July 2011 to 20th July 2011. At the outset learned CDR and Jt. CDR submitted that they pray for adjournment in order to engage a Senior Law officer. After hearing both sides this Court passed the following order : "When this matter was called out, learned CDR appearing on behalf of the Department submitted that when the matter was called out first for hearing on 12th May, 2011, the matter was adjourned fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that as regards the view taken by Hon'ble President, that the Revenue has failed to prove their allegations and consequently demand of dues and penalties needs to be set aside, submitted as under :- 104.2 It is his submission that in order to prove the allegation of clandestine removal it has to be proved by the Department that there was clandestine manufacturing. It is his submission that to allege clandestine removal, there has to be first clandestine manufacturing. He would submit that there are no evidence of proportionate purchases of the main raw material and/or other raw materials which are required and used in the manufacturing of the final product i.e. 'Gutka'/'Pan Masala'. He would submit that the clandestine manufacturing activity first has to be brought on record and then only clandestine removal if any can be alleged by the Department. It is his submission that the clandestine manufacturing and clearance charges needs to be proved by the Department and it is the burden on the Department to do so. 104.3 He took me through the final order recorded by the Hon'ble President from paragraph 41 onwards. He would draw my attention to the points on which the Hon'ble Presid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finished products made payments in cash to the company or their representative. It is also his submission that the Revenue has not brought on record any unaccounted cash lying in the factory premises or anywhere else which could be linked to appellants. For this proposition regarding there being no clandestine manufacturing of goods, the charge of clandestine removal cannot be fastened, he relied upon on the following judgments : (i) Ruby Chlorates (P) Ltd. v. CCE, Trichy - 2006 (204) E.L.T. 607 (paras 21, 22, 23 and 24) (ii) Jagatpal Prem Chand Ltd. v. CCE Delhi II - 2004 (178) E.L.T. 792 (Tri-Del.) (paras 10, 11, 12) (iii) Ghodavat Pan Masala Products Ltd. v. CCE, Pune - 2004 (175) E.L.T. 182 (para 14) 104.5 On specific query from the Bench, it is his submission that there is nothing on record that Revenue has preferred any appeal against these decisions but he submits that in the case of Durga Trading Company [2002 (148) E.L.T. 967] in para 9, in an identical issue it was held that no inference can be drawn for clandestine removal unless there is evidence of clandestine manufacture of the goods. It is his submission that this matter was challenged by the Revenue in Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 has specifically deprecated such action. He would submit that this would amount to reliance being placed as an evidence not disclosed to appellants and is beyond the scope of show cause notice as it was not relied upon. 104.10 It is his further submission that the adjudicating authority has relied upon the output of manufacturing activity in the form of other manufacture is totally beyond the scope of ahow cause notice and it is not correct. Such evidence was not put forth in the show cause notice. He would draw my attention to the show cause notice which was issued on 31-7-2000. In the case of Amar Jyoti Factories the observation of manufacturing activities was done by the adjudicating authority as on 20-10-2000 and in the case of Raj Lakshmi, observation was conducted on 12-7-2004. It is his submission that adjudicating authority in his order-in-original in paras 54.6 and 54.7 has extensively relied upon the capacity of production of these two manufacturers to come to a conclusion that the appellants could have manufacture more number of gutka/pan masala and hence there is clandestine manufacture. It is his submission that after issue of show cause notice, any evidence collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this particular reply dated 28-8-2002 was not considered by Member (Technical) while arriving at conclusion while recording his finding on the kachcha challans. 104.14 In summary, it is his submission that in the case of Atlas Conductors (supra), this Bench has taken a clear view that the demand cannot on presumption of manufacture but on the basis of actual manufacture which is the basis to come to conclusion as recorded by Hon'ble President in para 47 onwards that the findings of the adjudicating authority are without any evidence and is not correct view and is liable to be set aside. 104.15 Learned Senior Advocate submits that the order of Hon'ble Member (Technical) is incorrect and has not considered various evidences which were given during hearing. He would take me through a paragraph 3 onwards till paragraph 5. It is his submission that learned Member (Technical) has not considered the fact that Shri Moolchand Maloo and Shri Vikas Maloo had filed the affidavit as regards the meeting which took place, which was recorded in the statement placed on 17-11-1998. It is his submission that in the said affidavit dated 3-9-2002 Shri Moolchand Maloo had categorically stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as recorded by Hon'ble Member (T) seizure of huge quantity of unaccounted production is totally incorrect expression, as total quantity seized was 877 kg. (57 bags,) which was found lying on the shop floor of the factory premises. It is his submission that as regards the reliance placed on the purchase of material he would submit that during the proceedings before the Division Bench, they had filed the detailed chart which indicted how and what quantity of raw material, packing material or other material was purchased which was sought to be relied upon by the Revenue to hold against the appellants. After taking me through the said chart, it is his submission that it is very clearly mentioned that all the goods are supplied to either Kuber International or Kuber Tobacco Ltd. on payments received by cheques and no cash payment was ever received. He would submit that these submissions were recorded by suppliers and factory incharge of the appellants who also specifically mentioned that goods were procured from suppliers whose names and addresses were given but Revenue failed to pursue these leads. 104.17 As regards the contention on the consumption, it is his submission that during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of D. Bhoormull [1983 (13) E.L.T. 1546 (S.C.)] may not be applicable in this case, as it was in the case of smuggling of goods but here in this case there is a question of manufacturing activity and clandestine removal. He would distinguish the judgment of Radheshyam Kanoria v. CCE [2006 (197) E.L.T. 130]. 105. When this matter was called out in the afternoon for the hearing of the submissions from the Department's side, learned CDR submits that as per Section 129C(5) the point or points of difference should have been referred to third Member but in this case it is not so; it is his submission that unless the point or points of difference is not properly formulated or referred, they are not in a position to argue and not prepared in the matter. 105.1 It is noticed and brought to the attention of learned CDR that in the first session when the matter was called out, learned CDR had prayed for adjournment of the matter for four weeks which was declined. Again in the afternoon session, learned CDR cannot submit that they are not prepared for arguments. 105.2 After giving due consideration to the submission of learned CDR, I find that on 12th May, 2011 when the matter was listed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord is sufficient to prove charges or not. He would exhort me to go through the evidence on record. 106.2 On a specific direction from the Bench that, the scope of third Member reference is limited to the difference of opinion and the evidence recorded by the Hon'ble Member (Technical) and Hon'ble President, he took me to the findings recorded by the Hon'ble President from para No. 15 onwards on the Panchnama drawn on 9-10-1998. 106.3 It is his submission that difference of opinion which is referred talks about sufficiency of evidence i.e. to say preponderance of evidence on record to come to conclusion whether the charges are proved or not. He painstakingly, takes me through the entire findings recorded by the Hon'ble President from para 15 onwards. After taking me through the entire finding, it is his submission that the letter of the chairman of the C.B.E. & C. was not relied upon by the Revenue but was produced by the appellants during the course of proceedings before the adjudicating authority. It is his submission that the adjudicating authority has not concluded the matter of clandestine removal/manufacture based upon such letter. It is his submission that for arriving at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad less 2 digits as per the statement of Shri C.S. Vaid, summary of which is reproduced in para 7.15 of the show cause notice. It is his submission that the documents which are described as Kachcha chits/Hisaba books were in fact recovered in the presence of Mr. Bothra under a panchnama from the premises, used by the appellants as Guest House, and hence the conclusion reached by the adjudicating authority and upheld by Hon'ble Member (Technical) as regards the reliance on such documents to hold that there is clandestine removal of goods is correct. 106.6 It is his submission that the findings of the Hon'ble President that panchnama was faulty and hence the documents recovered under the panchnama could not be relied upon is totally incorrect and cannot be considered as being in accordance with law. 106.7 Due to paucity of time it was informed that matter will be taken up for further submissions of learned Jt. CDR on Monday, the 18th July, 2011. Submissions made on 18-7-2011 106.8 When this matter was called out today, learned Jt. CDR continued his arguments. It was submitted that he would like to add some more arguments on the panchnama issue. It is his submission that panchnama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t retraction letters which were written would not indicate what kind of force was used. It is his submission that such letters contains activity which was done subsequently i.e. on 19-11-1998 which cannot be recorded on 18-11-1998. It is his further submission that the finding recorded by the Hon'ble President in para 42-43 does not bear out of actual proceeding as it was undisputed that documents were recovered from 4130, Gali Barna. It is his submission that subsequently when the authorised signatory and others, when confronted with the documents, it came out that the documents, indicated details of clearance made to various distributors which included the clearances which were recorded in the statutory records and also clearances which were not recorded in the statutory records. It is his submission that there is a relation or link between the documents which were recovered and shown to the Directors/employees of the Company. It is his submission that as from the statement of Shri Bothra which is very clear that there is no dispute that he has brought the keys and opened the premises, it makes no difference that he opened the 'lock' or 'locks' and it is disclosed in his statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... left the job. 106.12 Learned Jt. CDR on this juncture submits that proposition given by learned Senior advocate today was placed before the Bench which differed on matter but both the members, i.e. Hon'ble President as well as Hon'ble Member (Technical) did not record any finding or did not refer. Submissions made on 19-7-2011 106.13 When this mater was called out, learned Jt. CDR raises the preliminary objection regarding the continuation of the matter to be heard by this Court. It is his submission that this Court has not been constituted as per the provisions of CEGAT Notification No. 2/CEGAT/99, dated 16-7-1999, as in the absence of Hon'ble President either on leave or on tour, Senior Vice President is required to exercise such powers. 106.13.1 Learned Counsel on the other hand, submitted that being a part heard matter, which has been continuing from 14-7-2011, there is no need for further constitution of the Bench. 107. On careful consideration of the submissions made by both sides. It is to be noted that this Court has been hearing this matter from 14-7-2011 continuously and hence this is a part heard matter which is being continuously heard. It is also brought to the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a being employee of appellant-company should have been produced for recording statement. He would distinguish the decision cited by Senior Counsel in the case of Ramji Dayawala (supra), Bareilly Electricity Supply (supra) and MSS Foods (supra) on the ground that the facts and circumstances mentioned in those cases and in the current cases are totally different. It is his submission in the cases in hand, Revenue did their best to bring on record all the evidence against the assessee while in the cases which were referred to, the issue was not that of same. 108.3 It is his submission that the affidavit filed by Vikas Maloo need not be considered by the Court for following reasons : 1. That Vikas Maloo has filed the affidavit on behalf of his father which is not correct. 2. The said affidavit has been filed almost after three years after recording of the statement. 3. That affidavit did not contradict the facts which were recorded in the statement and that the said affidavit only talks about his offering himself for cross-examination. He would submit that decisions relied upon by the learned Counsel in the case of Godrej Indus Ltd. can be distinguished directly on the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to be gone into this case. He would submit that records were recovered/resumed for KTPPL and KI are the same and were from 4130, Gali Barna.. (2) He would submit that as regards the authenticity and entries of records in the said hisaba books, as a specimen case he takes the entry in respect of Bhagwati General Mills and Diamond Transporters. 109.2 He would extensively take me through paras 16.1 and 19.2 of the show cause notice and submit that the details recorded therein clearly indicate that these were transactions which were recorded in the accounts meticulously, by the person. It is his submission that these transactions indicated the invoice numbers, cheques numbers, mode of payment DD numbers and was reconciled with the transactions recorded in the statutory books, and it clearly reveals that these documents cannot be doubted upon. It is also his submission that it cannot be anyone's case that these documents are forged and implanted by any person in order to make case against the assessee. He would submit that the allegations as detailed in paras 16.1 and 19.2 of the Show cause notice are found correct as recorded in order-in-original. It is his submission that his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submit that they are mainly arguing on following three points : 1 that whether the reference to Third Member was correct as per the provisions of law? 2. that Whether the reference which was returned back to the Hon'ble President and referred back to the Third Member was correct or not? 3. that Whether the Third Member should go into entire records or not? 110.1 He would refer to Section 129C(5) of Customs Act, 1962 for the purpose of difference of opinion. It was brought to his knowledge that very section have been referred to by Jt. CDR on 14-7-2011 when the matter was called and Bench have given a view reference is framed and this Court is seized with the matter of Difference of opinion. He would still insist on being heard on this point. It is the submission that a reference once returned in the month of May should be again returned back to the original Bench without answering as the reference is for the entire appeal. It is the submission that such a reference is incorrect. It is the submission that the referral Bench has not put the date, signature in the second reference which is being heard. They would reiterate the submissions made by Shri B.K. Singh and Shri R.K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission that the said point referred back is undated, and it is one order which is not in accordance with the provisions of Rule 26 of CESTAT Procedure Rules, which states that every order of the Tribunal shall be in writing and shall be signed and dated by the Members constituting the Bench concerned. Hence, it is their prayer that the third Member may return the reference and pass such an order as may deem fit and proper in the facts and circumstances of the case. 114. It is the submission that there was an amendment to Rule 26 which indicates about the order to be signed and the same should bear a date. It is the submission that the object of Rule 26 would defeated if the same is not followed. It is also the submission that the Rule itself would become otiose and redundant if the date is not considered mandatory. It was also mentioned during the course of argument that the order has been reserved by the third Member on 20-7-2011 and 4 months have elapsed and no order has been passed and hence the reference may be returned back. 115. Ld. Sr. Counsel Shri Shanti Bhushan along with Shri R. Adsure, Shri Manish Pushkarna and Shri Sarkar, Advocates, appeared on behalf of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of opinion on 14th and 15th July, 2011 and from 17th July to 20th July, 2011 is unwarranted. Be that as it may, I consider the original reference having been dated and signed by both the Members and subsequent reference being curative in nature, for reference to third Member, can be heard and disposed by me. Hence, the application filed by the Revenue is devoid of any merits and is dismissed. 118. This difference of opinion was heard by me on 20-7-2011 and orders were reserved by me. As per the standing order, the Bench has to pass an order on a matter within 4 months of reserving such order and in case the same is not passed, further extension of 2 months can be granted by President. In the case in hand, on a reference being made to Hon'ble acting President/HOD, the Hon'ble acting President/HOD has directed me to pass an order within further 2 months from the date of reserving the order, as indicated by the Registrar vide his Letter F. No. 01/(18)/D.O.O./Reg./CESTAT/2011, dated 28-11-2011. Whether the evidence on record is sufficient to prove the charges against the assesse : 119. The allegation against the assessee is of clandestine removal as well as under-valuation to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Kachcha challans, (vi) Seizure of 57 bags of Mool Chand Brand Gutka valued at Rs. 3,76,200/- in the factory premises of KTPPL on 9-10-1998, (vii) Contents of the Loose Sheets, Kachcha Challan books and hisaba books seized from the premises at 4130, Gali Barna, Delhi, (viii) Verification of GR/RR, mentioned in the Kachcha Challan, (ix) Inquiry with the consignees, (x) Seizure of blank invoice/bill books of four companies from premises at 5987, Plot No. 83, South Nawab Road, Basti Harphool Singh, Delhi, where one Shri Ravi Kumar Duggar, accountant of KTC was present, (xi) Seizure of Rs. 1.8 Lacs on reasonable belief that the same was sale proceeds of goods cleared without payment of duty, (xii) Seizure of other documents/records and unaccounted materials from various places. 123. As per the Revenue, the above evidence is sufficient to sustain the charge. I find that at first blush, it may appear to be sufficient, however a deeper scrutiny reveals to the contrary. The above evidence is not relevant and credible material evidence, sufficient to establish the case against the appellant-company even applying the test of preponderance of probability and requires too many assump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Protest' on the TR-6 Challans, while depositing the total amount of Rupees Two Crores. These statements were not only retracted by them, but Shri Vikas Malu also submitted duly affirmed affidavit dated 3-9-2002, and offered himself for examination before the adjudicating authority in presence of officer of the Department. Despite this, opportunity of his cross-examination was not availed by Revenue, which lends credence to the retraction affidavits. As per ratio laid down in Parle Beverages Pvt. Ltd. v. CCE, Bombay, 1998 (98) E.L.T. 585 (S.C.), affidavit cannot be brushed aside solely on account of delay without going into the genuineness of the evidence adduced, and in case of doubt deponent can be cross-examined by the Revenue. In the affidavit filed by Shri Vikas Malu, he has not only stated that he was not the Director during the relevant period, but has also submitted the documentary evidence to that effect. Moreover, as evident from the impugned Order Shri Mool Chand Malu also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances 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. 127. It would be necessary to analyze whether the evidences, other than the retracted oral evidences, are credible for being used as corroborative evidence. The Hon'ble Supreme Court in case of Sitaram Sao v. State of Jharkhand - (2007) 12 SCC 630, pithily encapsulated the idea of "corroborative" evidence, in the following words : "34. The Word 'corroboration' means not mere evidence tending to confirm other evidence. In DPP v. Hester - (1972) 3 All ER 10.16, Lord Morris said : "The purpose of corroboration is not to give validity or credence to evidence which is deficient or suspect or incredible but only to confirm and support that which as evidence is sufficient and satisfactory and credible; and corroborative evidence will only fill its role if it itself is completely credible……." There can be, therefore, no "corroboration" of evidence, which is itself unworthy of credence." 128. That, apart from these retracted oral evidence, the main evidence on which reliance is placed by the Revenue are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire records of proceedings, there is no evidence to indicate that there was clandestine manufacturing. There is no independent tangible evidence on record of any clandestine purchases or receipt of the raw materials required for the manufacturing of the alleged quantity of finished goods for its clandestine removal from the factory. In the entire notice and the order there is no satisfactory and reliable independent evidence as regards the unaccounted manufacture and or receipt of the huge quantities of raw materials. The quantities of the alleged bags dispatched from the factory would require some transportation arrangement for delivery from the factory. However, any reliable evidence about any vehicle coming to or going out of the factory without proper entries is not forthcoming. There is also no cogent evidence about any freight payment for any such movement. 131. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moware Pvt. Ltd. - 2011 (266) E.L.T. 45 (Guj.), has specifically held as under : "7. Thus, on the basis of findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which corroborates the fact of clandestine manufacture and removal of final products. In the circumstances, on the basis of the material available on record, it is not possible to state that the Tribunal has committed any legal error in giving benefit of doubt to the assessee." (Emphasis supplied) The above ratio, as laid down by Hon'ble High Court of Gujarat, would squarely cover the issue before us. 16. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s. VTPL, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory, as has been sought to be done in the impugned Orders. There is no evidence of additional employees having been employed to enhance the production, nor is there any evidence of excess wages having been paid to the existing employees. However, it is to be assumed that the factory was continuously running for three shifts, more machines than declared were installed, and that the actual production was grossly suppressed, (ii) Although, the stock of raw material found on physical verification at factory at 31-K, Siraspur, under panchnama dated 9-10-1998 was found as per record, and there is no evidence of purchase of main raw materials 'Betel Nuts' (which constitutes 85% of the raw materials), Catechu, Perfume and Lime, it is to be assumed that all these raw materials were purchased in cash, brought to factory, and used in unaccounted manufacture of Pan Masala/Gutka in the factory premises. (iii) Despite the fact that the panchnama do 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 'Kachcha Challans' or 'loose sheets with written pages', it is to be assumed that the same wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y were 'Branded Gutka' manufactured and clandestinely cleared by the appellant-company. (xv) It is to be assumed that there must be receipt of cash amount over and above the sale amount recorded in statutory records to sustain the charge of under-valuation. (xvi) Despite retractions having been filed, and the veracity of alleged voluntary statements was effectively assailed in cross-examination, it is to be assumed that all the statements relied by the Revenue were voluntary. 135. There is no dispute on the fact that in adjudication proceedings, the charge of clandestine removal and under-valuation is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions. Suspicion however grave cannot replace the proof. As rightly pointed out by the Hon'ble President with detailed findings, the link between the documents recovered in search and the activities of the appellants in their factory is required to be proved. However, I find that due to various reasons as recorded above, the Revenue has failed to prove the same. 136. The loose sheets, Kachcha Challans and hisaba books were not recovered f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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