9911796707
TMI Blog2013 (11) TMI 1525X X X X Extracts X X X X X X X X Extracts X X X X ..... viable on 214.685 MT of DTY clandestinely manufactured and cleared during the period 1-4-2001 to 30-6-2002, liable to be recovered under the first proviso to Section 11A of the Act. 2. Besides the demand of duty and interest thereon and imposition of penalty against the appellant [hereinafter referred to as "GSL"], the impugned order has also imposed penalties upon Mohan Lal N. Gupta [Director of GSL] and Sunil N. Gupta [Director of Nova Petrochemicals Ltd.]. Against both the Directors penalty of Rs. 50,00,000/- each has been imposed by the Commissioner. The Directors against whom penalties have been imposed by the Commissioner are also in appeal before us. The said appeals are also being disposed of by the present order. 3. The brief facts which are necessary for the disposal of the appeal may be stated thus : GSL, against whom the duty demand has been confirmed, is registered with the Central Excise Department and is engaged in the manufacture of excisable goods viz., Texturised and Draw-twisted Yarn (DTY) made of Polyester, falling under Chapter 54 of the first schedule to the Central Excise Tariff Act, 1985. Investigations in the present case concluded with the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or Lot Number and/or the Denier of either POY viz., 115/68 or the Finished DT Yarn viz., 70/68. These entries pertained to illicit procurement of POY of 115/68 Denier from Nova, which were subjected to Draw Twisting at GSL. The document marked as A-23 is a note book, containing 83 pages, which are serially numbered. The entries contained therein are the details of random samples, drawn from different positions of spindles of the DT machine by the quality control department of GSL. According to the show cause notice, from the note book, it could be noticed that mainly POY of 115/68 Denier has been subjected to process in the DT machine by GSL. The document marked as A-24 is a note book, containing 1 to 39 pages, and has been maintained for the period from 31-3-2001 to 31-3-2002, and has the details regarding the raw material yarn purchased. According to the show cause notice, the details of purchases shown indicate that all the quantities of POY of denier of 115/68 have been purchased by GSL from Nova illicitly. The document marked as A-25, which is also a note book containing similar detail of purchases of raw material yarn. Statement of V.N. Parab was recorded on 16-8-2002. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26-9-2008, in which they requested for cross-examination of the investigating officers as well as the persons whose statements have been recorded during the course of investigation. Two persons, whom GSL requested for cross-examination is namely Rajendra Kaushik (Production Manager) and V.N. Parab. Vide letter dated 7-10-2008, the Joint Commissioner of Central Excise, communicated the decision of the Commissioner stating that the request for cross-examination cannot be acceded to. The reason stated for not allowing cross-examination of Rajendra Kaushik was that there is no reference to his statement in the show cause notice. The officers have only incorporated the facts, which Kaushik narrated while drawing the Panchnama dated 16-8-2002, in his presence. Further, as regards the request for cross-examination of V.N. Parab, it has been stated that since he has left the job and his whereabouts are not known to GSL, the request for cross-examination cannot be acceded to. In the final reply dated 19-11-2008, GSL once again submitted that if the request for cross-examination is not acceded to, it would amount to violation of principles of natural justice. On merits, they inter alia subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. Statement of V.N. Parab is, therefore, corroborated by the statements of Mohan Lal Gupta. Mohan Lal Gupta, on being shown A/20, put his dated signature on it and did not disagree that the details matched, which means that he has admitted them to be correct. Mohan Lal Gupta, on being shown A/21, put his dated signature thereon and said that the entries are in conformity with the entries in A/19. A/21 is, therefore, a vital piece of evidence for arriving at GSL's production. A/22 carries the signature of V.N. Parab. Mohan Lal Gupta's statement refers to Crill change everyday. Therefore, A/22 is corroborative evidence of use of POY by GSL. Drawal of samples from different positions of spindles shows that goods were processed on the DT machines and the production has not been shown in the records of GSL. As POY of 115/68 denier was mainly purchased from Nova, the Adjudicating Authority concluded that Nova had clandestinely cleared POY of 115/68 denier to GSL. The Adjudicating Authority has confirmed the duty demand of Rs. 73,00,168/- on basis of entries made in the seized record titled as 'A-23' and relying upon the statement dated 3-9-2003 of Mohan Lal Gupta, Director of GSL. Moh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be adopting most of the arguments made by the ld. Senior Advocate, Shri M. Chandrasekaran appearing along with him in the appeal preferred by Nova. In this factual backdrop, it would be necessary for us to deal with the submissions made by the Senior Advocate, once again in this appeal, insofar as, the same are relevant to the facts of the present case. 8. In the present appeal, the appellant has as early as on 19-11-2004, had requested for cross-examination of the witnesses to examine the reliability and veracity of the evidences brought on record. In their further communications, GSL had also raised the need and relevancy of cross-examination in cases like the present at the initial stage and cited several judgments in support thereof, starting with State of Kerala v. K.T Shaduli Yusuff Grocery Dealer (AIR 1977 SC 1627). By a letter dated 7-10-2008, the request for cross-examination has been rejected. The reason stated in the letter for rejecting cross-examination is that Rajendra Kaushik, whose cross-examination has been sought by GSL, has made no statement under Section 14 of the Act. The officers have only incorporated the facts narrated by Kaushik while drawing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof be filed and an opportunity accorded to the opposite party who challenges this fact." In Swadeshi Polytex Ltd. v. CCE, Meerut - 2000 (122) E.L.T. 641 (S.C.), it was held that if the Adjudicating Authority "intends to rely upon the statement of any such persons, the Adjudicating Authority should give an opportunity of cross-examination to the appellant". In Lakshman Exports Ltd. v. CCE, 2002 (143) E.L.T. 21 (S.C.), the Hon'ble Supreme Court had held that where an assessee had specifically asked to be allowed to cross-examine the representatives of two concerns to establish that goods in question had been accounted for in their books of accounts and the appropriate amount of Central Excise duty had been paid, the logic of such request is clear from what is stated therein. In Basudev Garg v. CC, New Delhi, 2013 (294) E.L.T. 353, the Hon'ble Delhi High Court relied upon the earlier decision in J&K Cigarettes v. CCE, 2011 (22) S.T.R. 225 (Del.) = 2009 (242) E.L.T. 189 (Del.) and held that, insofar as general propositions are concerned, there can be no denying that when any statement is used against the assessee, an opportunity of cross-examining the persons who made those st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder reference were challenged as being inadmissible in evidence as the appellant's request for an opportunity to cross-examine these witnesses had been unfairly declined thereby violating the principles of natural justice. On the other hand, it was argued by the department that right of cross-examination was available to a party under the Evidence Act which has no application to adjudication proceedings under the FERA and Adjudicating Rules framed thereunder. We have caused to the appellant nor was demonstrated by the appellant before the Hon'ble Supreme Court or before the Courts below. We agree with the submissions of the ld. Senior Advocate that the said decision of the Hon'ble Supreme Court does not support the proposition that rejection of request for cross-examination of witnesses whose statements have been relied upon, does not amount to violation of principles of natural justice. On the other hand, the observations extracted above demonstrate to the contrary. As far as the facts before the Hon'ble Supreme Court were concerned, production of the documents being in the nature of production of documents under Section 139 of the Evidence Act, their cross-examination was prohib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Special Counsel for the Revenue had no objection to argue the case of the Revenue fully on merits and justify the correctness of the impugned order. We, therefore, proceeded to hear the matter fully and examine the entire case on merits as well. 12. The ld. Senior Advocate while addressing arguments on behalf of Nova had submitted that there is a long line of decisions of Courts and of this Tribunal in the matter of how clandestine manufacture and clearance of goods has to be established by Revenue. He submits that the law, in this regard, has been repeatedly laid down by this Tribunal in a long line of cases, some of which have also been affirmed by different High Courts, and one of them, by the Hon'ble Supreme Court. The issue of clandestine manufacture and clearance of goods arises, according to the ld. Senior Advocate, in the case of first three demands confirmed in the impugned order and has some relevance to the fourth demand as well. He, therefore, submitted that we may hear the submissions of both the parties on the said issue and, thereafter, apply the principles to facts relating to each demand. 13. In a Note submitted by the learned Senior Advocate for N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eman were not corroborated by any other evidence. Several decisions of this Tribunal were cited in support of the contentions of the appellant [CCE, Meerut v. Moon Beverages Ltd., 2002 (150) E.L.T. 976, Kabra Enterprises & Others v. CCE, 1999 (109) E.L.T. 571, Kothari Products Ltd. and Others v. CCE, Kanpur, 2003 (159) E.L.T. 1187, CCE v. Raman Ispat, 2000 (121) E.L.T. 46]. This Tribunal cited and followed the earlier decision in the Moon Beverages Ltd. case (supra) to the following effect : "it is well settled that the charge of clandestine removal cannot be established on the basis of one single factor which in this case, is the figures of sales reflected in the computerised sheets recovered by the Department from M/s. PEL. Without obtaining evidence such as evidence of other inputs required for manufacture of finished product namely Sugar, Carbon-di-Oxide being purchased and utilised in the manufacture of the final product during the period in dispute is required. There is no such evidence in the present case. There is also no evidence regarding higher electricity consumption. There is also no evidence of receipt of extra s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o positive evidence of clandestine production and removal of goods was answered against the Revenue and in favour of the assessee. (v) In T.G.L. Poshak Corp. v. CCE, 2002 (140) E.L.T. 187, this Tribunal considered the issue as to whether the demands can be confirmed on the basis of recovery of exercise Note Books and certain balance sheets maintained by the assessee and in the absence of any corroborative evidence. In fact, in a tabulated form this Tribunal dealt with the judgments which were referred to, to support the plea that demands cannot be confirmed which contained the reason for this Tribunal coming to the conclusion that, in the absence of any corroborative evidence, of a tangible nature, clandestine removal cannot be established. This Tribunal relied on the tabulated list of citations furnished by the Counsel that unless there is clinching evidence on the nature of purchase of raw material, use of electricity, sale and mode of flow back of funds, demands cannot be confirmed solely on the basis of Note Books maintained by some workers. (vi) In Hilton Tobacco v. CCE, 2005 (183) E.L.T. 378, certain private documents maintained in the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andestine clearances. The Managing Director of the company had even stated that they were making clandestine clearance of the finished products without recording the same in their books of account. The request for cross-examination of some of the persons whose statements were relied upon was rejected by the Adjudicating Authority only on the ground that the assessee had not given any reason and justification for their cross-examination. This Tribunal held that this approach of the Adjudicating Authority is inconsistent with the law of evidence. On a careful perusal of the entire records of the case, the Tribunal found that there was nothing on record as to unrecorded purchases or consumption of other various raw materials in the manufacture of finished products. There was no statement of suppliers of raw material, except in respect of one of the raw materials. His cross-examination has also been rejected. In the absence of any other tangible evidence to show that other major raw materials had been procured without recording the same in books of accounts, this Tribunal did not accept the contention of the Revenue that finished goods had been clandestinely manufactured and cleared. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e established on assumptions and presumptions. Such a charge has to be based on concrete and tangible evidence. In this context, reference may be made to Oudh Sugar Mills Ltd. v. Union of India - 1978 (2) E.L.T. J172 (S.C.), wherein the Apex Court has observed that demand of duty cannot be raised on the strength of assumptions and presumptions. There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. This very principle of law had been applied by the Tribunal in a number of cases and out of those, few are, Amba Cement and Chemicals v. CCE - 2000 (115) E.L.T. 502 (Tribunal) = 2000 (90) ECR 265, Gurpreet Rubber Industries v. CCE - 1996 (82) E.L.T. 347 and Madhu Foods Products v. CCE - 1995 (76) E.L.T. 197. 10. For want of any legal, tangible and concrete evidence, the duty demand of Rs. 4,64,56,058/- as confirmed by the learned Commissioner along with equal amount of penalty and interest, against the company appellant No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d clearance with mathematical precision as has been observed by the Hon'ble Supreme Court in CC v. D. Bhoormull, 1983 (13) E.L.T. 1546. In our view, this submission may be of help to the Revenue only in cases where, in the matter of clandestine manufacture and clearance, there is some tangible evidence of such manufacture and clearance by Nova. This Tribunal has, in the above referred cases, laid down several criteria which could go to establish the cases of clandestine manufacture and clearance. Where such ingredients exist, a contention that a case need not be proved with mathematical precision may become relevant. The decision in D. Bhoormull would not, therefore, be of help to the Revenue in cases where there is no evidence at all satisfying the tests laid down by this Tribunal in the long line of cases referred to earlier. In support of the submission regarding preponderance of probability being tested to determine the issue the learned Special Counsel had referred to 3 decisions. Gulabchand Silk Mills Pvt. Ltd. v. CCE, 2005 (184) E.L.T. 263, Umiya Chem v. CCE, 2008 (7) LCX 0602 = 2009 (239) E.L.T. 429 and Ureka Polymers v. CCE, 2001 (127) E.L.T. 618. These decisions, accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : It is the contention of GSL that the demand of Rs. 32,07,422/- was wholly illegal and without any justification because no evidence has been produced to the effect that GSL had actually manufactured the quantity of 91929.140 Kgs of DT Yarn, which is alleged to be cleared clandestinely without payment of duty. It was further submitted that as per Annexure A(1) of the show cause notice it is clear that the figures of the alleged clandestine manufacture and removal has been arrived at on the presumption that GSL had achieved during the period 1-7-2002 to 15-8-2002 an optimum production of 1867 Kgs of DT Yarn. However, there was no evidence showing that GSL had achieved optimum production of 1867 Kgs of DT Yarn during the period of 45 days. There was also no evidence or justification for showing how and why the optimum production was achieved by GSL only for a period of 45 days and not at any other point of time. It was further submitted on behalf of GSL that the figure of optimum production of 1867 Kgs of DT Yarn per day was taken from Register A-21 but in reality no such details were found in the said Register. No clarification has been sought by the investigating officer regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Adjudicating Authority has confirmed that the duty demand of Rs. 32,07,422/- on the basis of records recovered from the premises of the GSL. Mohan Lal Gupta, Director of GSL on 3-9-2003 has deposed that there are 156 positions on each Crill and on an average 10 Kgs of POY was loaded for processing each day. Thus, total average weight for each Crill were worked out to 1560 Kgs per day. Further, Mohan Lal Gupta had stated that there was Crill change every day and the factory was running in two shifts. From the statement of Gupta the only inference that could be drawn was that on an average 1560 Kgs of DT yarn was being manufactured by GSL each day. It was also submitted that the Adjudicating Authority has also relied upon the seized records titled as A-19, A-20, A-21, A-22 and A-23, the statement of V.N. Parab and comparing the same with the entries made in the A-19, it becomes clear that the figure of 1867 Kgs appearing in all the pages of A-19 register has been mentioned as optimum production for the day and is arrived after considering the aforesaid figure and the time taken for the machine idle. We have considered the submissions of both parties. We find that no evidence ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court emphatically declared in the Oudh Sugar Mills case (supra). We are of the view that there is no tangible evidence produced by the department to establish that GSL has clandestinely manufactured and cleared DTY on which the present demand has been made. We, therefore, set aside the demand of Rs. 32,07,422/- as being illegal and unjustified. 16. As regards the demand of Rs. 73,00,168/-, it is the contention of GSL that the said demand has been made on the basis of seized records i.e. document titled as A-23. It was further submitted that the said demand was purely based on assumptions and presumptions as it has not been established by the Revenue as to who had written the details in A-23. The purpose for making such an entry in the register was also not clear. The Revenue has placed their own interpretation of various words and nomenclature found in the entries in the said register. It was further submitted that the entire basis of demand of Rs. 73,00,168/- was the Note Book containing 83 pages which was seized from the factory and the said Note Book contained details of samples drawn from various position of spindles on DT Machine. On the basis that the average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DT machine. We have considered the submissions of both parties. We find that no evidence has been produced by the Revenue to show that GSL has effected sale of such huge quantities of DTY weighing 214.685 mtrs. There is no tangible evidence of GSL having actually produced all the DTY or Twisted Yarn from out of non-duty paid POY supplied by Nova or by another company. No transporters' documents have been seized or produced by the Department to show transport and sale of such huge quantities of POY from Nova or any other company to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcoming of purchase of raw materials by Nova or any other company for production of POY in such huge quantities, or of payments effected by GSL to Nova or any other company for the excess quantities of POY, clandestinely manufactured and cleared by Nova or any other company and sold to GSL, or even of payments made by the buyers of DTY from GSL made out of quantities alleged to have been purchased by GSL from Nova or any other company. We also find force in the submission made on behalf of GSL that no efforts have been made by the Revenue to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
