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TMI Blog2015 (12) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... was voluntary, there was no legal bar on the Court relying on it to order a conviction. However, where it was retracted, and even if the person retracting was unable to show that it was obtained under duress, “however, rule of prudence and practice does require that the Court seek corroboration of the retracted confession from other evidence.” It was further observed that “each case would, therefore, require to be examined in the light of the facts and circumstances in which the confession came to be made and whether or not it was voluntary and true.” There was no ‘confession’ as such by any of the noticees as to their involvement in the activities alleged against them in both the SCNs. The Department relied on the statements made by third parties including transporters, agents, and their employees. Where such statements are subsequently retracted or resiled from, it becomes necessary for the Department to produce other evidence which is of an independent nature which corroborates the retracted statements. - none of the witnesses who were cross-examined stood by their earlier statements. It is one thing to overlook this feature on the premise that all of them were under the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mical Works to 'self' at Hubli on 3rd July 2003 and 4th July 2003. Mr. Rajiv Gupta, partner of Gupta Chemical Works was not questioned about the said GRs. One general observation in this regard is that the Department does not appear to have carried the investigations to their logical end. The CESTAT examined 17 truck guidance notes and the Court has also been shown a sample of one of them which shows that the consignment was to be sent to Gujarat. It does not show who the consignor is and whether it had anything to do with VCPL. The loading register also showed only some private marks and numbers without any mention of the description of the goods. The Court has also been shown some of the copies of the loading challans/registers. They only describe the goods as pan masala. The persons who wrote the loading registers and the day book were not identified and their statements were not recorded. One employee of GG Carriers, Mr. Harjinder Singh, was examined. He mentioned the name of the booking clerks as Naresh Kumar and Vishnu but neither of them was examined. In his cross-examination, Mr. Harjinder Singh denied transporting gutka of VCPL. It was for the Department to explain why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CM APPL No. 16542/2014 (for delay) in CEAC 89/2014 CM APPL No. 16550/2014 (for delay) in CEAC 90/2014 1. For the reasons stated therein, the delay in filing the present appeals are condoned. 2. The applications are disposed of. CEAC Nos. 62/2014, 73/2014, 74/2014, 75/2014, 76/2014, 77/2014, 78/2014, 79/2014, 80/2014, 81/2014, 82/2014, 83/2014, 84/2014, 85/2014, 86/2014, 87/2014, 88/2014, 89/2014 90/2014 3. These appeals under Section 35G of the Central Excise Act, 1944 ( Act ) are directed against the final order dated 21st October 2013 passed by the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) whereby the appeals of the Respondents were allowed and the orders-in-original dated 9th June 2005 and 21st November 2005 passed by the Commissioner of Central Excise, Delhi-I ( CCE ), New Delhi were set aside. Background facts 4. The facts in brief are that Vishnu Co. Pvt. Ltd. ( VCPL ) (the Respondent in CEAC No. 62 of 2014), having its office at Rama Road, Shivaji Marg, New Delhi, was engaged in the manufacture of gutka and pan masala under the brand name Vimal , falling under the Chapter Heading No. 21 and 24 of the Central Excise Tariff Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g godowns of some of the transporters and their vehicles. The quantities of inputs found in excess of the recorded balances were in respect of both supari and tobacco. It was further observed that no account was being maintained in the factory in respect of other inputs and packing material. In the absence of any stock register for these inputs or packing material, the actual physical balances were recorded under the panchnama drawn and the goods found unaccounted were seized. No stock of either jute bags, used for packing their products or menthol, one of the important ingredients, was found in the factory of VCPL. The goods after seizure were handed over to Mr. H. Sunder, Director of VCPL (who is also the Respondent in CEAC No. 80 of 2014). Searches were also carried out in the premises of M/s. Ashoka Tobacco, M/s. Lalwani Convertors, M/s. Pragati International (P) Ltd. from whose premises further seizures were made of unbranded loose chewing tobacco and printed laminated rolls meant for packing Vimal brand gutka. The first Show Cause Notice 8. A show cause notice ( SCN ) was issued on 24th December 2003 to VCPL and 14 other entities/persons which included transporters whos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had noted that VCPL had voluntarily deposited a sum of ₹ 6,93,000 towards payment of duty on 210 bags of Vimal gutka seized on 9th July 2003 and total of ₹ 1.96 crore voluntarily deposited on 5th July 2003, 15th July 2003 and 4th August 2003 towards duty not paid on past clearances. It also proposed to appropriate the said deposits towards the duty demand of ₹ 12,92,90,241. 12. The SCN proposed confiscation of other seized materials and imposition of penalties against each of the other noticees under Rules 25 and 26 of the Central Excise Rules 2002 ( CE Rules ). The second search and subsequent Show Cause Notice 13. A second SCN dated 1st March 2004 was issued pursuant to searches conducted in the office-cum-godown premises of M/s. Gopi Roadlines, M/s. Singhal Transport Company and M/s. Laxmi Freight Carrier (P) Ltd on 3rd September 2003. The second SCN was issued to VCPL, its Director H. Sunder, its Manager, Mr. R.K. Tripathi and three transporters, M/s. Gopi Roadlines, M/s. Singhal Transport Company and M/s. Laxmi Freight Carriers (P) Ltd. It noted that the statements of the respective employees of the abovementioned transport companies were recorded at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to seizure of 4135 kgs of flexible laminated film were also dropped. 17. As regards the second SCN dated 1st March 2004, the CCE by order dated 21st November 2005 confirmed the duty demand of ₹ 2,75,15,400 and imposed a penalty of an equal amount apart from interest against VCPL; imposed a penalty of ₹ 1 crore against Mr. H. Sunder; ₹ 5 lakhs each on Mr. R.K. Tripathi and M/s Gopi Roadlines; a penalty of ₹ 10 lakhs on Paramjeet Singh Kakkar, proprietor of Singhal Transport Co.; a penalty of ₹ 15 lakhs on M/s Laxmi Freight Carrier Pvt. Ltd.; and ₹ 1 lakh on Gopal Krishan Parashar, Director of Laxmi Freight Carrier Pvt. Ltd. Impugned order of the CESTAT 18. Aggrieved by the aforementioned Orders-in-Original, the Respondent noticees herein filed two sets of appeals before the CESTAT arising out of the first and second SCNs. The Department too filed appeals arising from the first SCN to the extent that the proceedings, against VCPL to the extent of seizure of 9356 kgs of supari etc., against Ashoka Tobacco relating to seizure of 27382 kgs of unbranded loose chewing tobacco and against M/s. Lalwani Convertors relating to seizure of 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals filed by the Department were dismissed. In respect of the appeals arising from the second SCN, the CESTAT: (xi) set aside the duty demand of ₹ 2,75,15,400/- against VCPL, interest thereon under Section 11AB and penalty on them under Section 11AC. The penalty under Rule 26 of the CE Rules on Mr. H. Sunder was also set aside. (xii) The penalty under Rule 26 of the CE Rules on M/s. Laxmi Freight Carriers (P) Ltd., Mr. Gopal Krishan Parashar, Mr. Paramjit Singh Kakkar, Proprietor, M/s. Singhal Transport Company and Mr. R.K. Tripathi of VCPL were set aside and as such, the appeals filed by them were allowed. (xiii) The penalty under Rule 26 of the CE Rules on M/s. Gopi Road Lines was set aside and their appeal was allowed. (xiv) The confiscation of 25 bags of sweet supari from the premises of M/s. Gopi Road Lines and redemption fine in respect of them was upheld. 20. The main findings of the CESTAT were as under: (i) The entire evidence of the Department was primarily ambiguous records maintained by transporters and the oral statement of the employees of the transporters. Such records maintained by transport companies nowhere showed that the goods being t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng received the consignments of gutka through the transporters mentioned above. The confirmation of demand of duty based upon half written ambiguous records of third parties was not in accordance with law. The present appeals 21. In the present appeals by the Department the questions sought to be urged are as under: (i) Whether statements recorded under provisions of Section 14 of CE Act by the officers of the Department can be taken as proof of the statutory violations by the Respondents? (ii) Whether demand of duty based on the third-party documents supported by corroborative statements was not justified? (iii) Was the CESTAT justified in setting aside or reducing, as the case may be, the demand, redemption fine and confiscation of goods by ignoring material facts? (iv) Was the CESTAT justified in ignoring the entire evidence on record and statements of the witnesses and concerned persons? 22. In the course of the hearing of these appeals, Ms. Sonia Sharma, learned Senior standing counsel for the Department, urged that the central issue projected by the Department in these appeals in the form of the above questions was to show that the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the order of the CCE, is a second appeal, the first being to the CESTAT. Unless there are substantial questions of law that arise, an appeal would ordinarily not be entertained. 26. On findings of fact, ordinarily it is the CESTAT which would have the final say in the matter. A question of law would arise in that context only where it is possible to demonstrate (a) some vital piece of evidence which is material to the determination of the issues involved has been overlooked by the CESTAT or (b) where it is has made a patent error in appreciation of the evidence or misread the evidence on record. In Sree Meenakshi Mills Limited v. CIT (1957) 31 ITR 28 it was observed that a finding of fact is open to attack when it is shown that there is no evidence to support it or if it is perverse. The threshold for demonstrating perversity has always been high. 27. In Ratanchand Darbarilal v. Commissioner of Income-tax 1985 (22) ELT 653 (SC) it was held that if an order was passed by the Tribunal without taking into account the relevant factors or if the Tribunal had mis-directed itself by over-looking the salient features and reached an erroneous conclusion, that would make for a q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aporation since it would then be 97.2% which was in the realm of impossible. It is urged that all of the above evidence was overlooked by the CESTAT. 31. The Court finds that the CESTAT has considered the report of the SIIR and has examined carefully the evidence of Mr. Chib. It noted that the percentage of the contents of the mixture as declared by VCPL was 86% supari, 2.2% lime, 6% tobacco, 5% kattha and 0.47% menthol, which added up to 99.67%. The other ingredients were perfumes and substances which were less than 1%. The total of the percentage of these five ingredients in the report of SIIR, instead of being more than 99%, was only about 90%. This by itself, therefore, created a doubt as to its correctness. 32. Indeed the Court finds that the explanation offered by Mr. Chib for the balance 9% is not very convincing. Considering that the test conducted was on a small quantity of 1.8 gm of gutka, the failure to account for 9% of the ingredients would be significant. The 9% could well have contained some percentage of the five main ingredients. That might then alter the inference to be drawn regarding the actual consumption of menthol. The missing contents that constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 878 pertaining to smuggling. Although it is observed by the Court that this initial onus of proof on the Department can be sufficiently discharged by circumstantial evidence this was in the context of the fact that provision itself shifted the burden on the person in whose possession the contraband is found. As far as the CE Act is concerned, there is no such provision that raises a presumption and shifts the burden on to the person who is charged with clandestine removal of excisable goods. Section 14 of the CE Act provides for a detailed enquiry involving the gathering of evidence through documents and recording of statements. It does not dispense with the principles of natural justice or the general principles of fairness that govern all departmental inquiries. In the decision of the Bombay High Court in Patel Engineering Ltd. v. Union of India 2014 (307) ELT 862 (Bom.) an expert panel was formed by the Department in response to the challenge by the noticees to the certificates produced by the Chartered Engineer. It was in that context that it was held that the denial of an opportunity to cross-examine the persons who were part of the expert panel would not result in the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the retracted statements. 39. The CCE has in the Orders-in-Original proceeded to rely on the retracted statements or on statements of persons not offered for cross-examination by either disbelieving that they were obtained under coercion or by holding the persons who have retracted or resiled from the earlier statements as having done so under the influence of the noticees themselves. The CCE noted that the noticees had submitted a list of 20 such witnesses whom they wanted to cross-examine. The CCE observed: Though it is a very large number and not very convincing grounds were given for their cross-examination, yet all the 20 witnesses were allowed and all of them were given two opportunities each (but) only 6 of them appeared. The CCE further observed that instead of appearing for cross-examination they chose to provide sworn affidavits to the noticee alleging high handed methods of the investigating officers. If the noticees were really interest in cross-examining them they themselves could have made them available, particularly when they were so cooperative that they provided sworn affidavits. 40. In fact Ms. Sharma too insisted upon reading from such retracted statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a possible approach and does not render its order perverse on that score. Canvas bags 44. Turning to some of the specific instances, as regards the allegation of excess consumption of unaccounted receipt of canvas bags, reliance was placed on the documents seized from M/s. Ram Lal Ram Chandra (India) Ltd. (RLRC), the case of the Department is that during the period from April 2002 to 4th July 2003, VCPL had received only 105000 canvass bags from RLRC. The allegation of excess receipt to the tune of about 510650 canvass bags was based on the entries in the gate register. However, as noted by the CESTAT, the delivery challans did not indicate that canvas bags, covered by the delivery challans had in fact been delivered to VCPL. The delivery challans mentioned the registration numbers of trucks and yet no enquiry was made with the drivers or owners of the trucks. Moreover, Mr. Rajiv Gupta, Managing Director (MD) of RLRC was not available for cross-examination. He submitted an affidavit to the effect that certain quantities of canvas bags bearing Vimal brand had been sold at factory gate also in cash. Regarding the jute bags, the panchnama and seized bags from M/s. Shyam Jute I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Singhal Transport 47. Relevant to the seizures effected from Singhal Transport Co., were the statements of Mr. Yogesh Sharma, Godown Incharge, Mr. Sita Ram and Mr. Mohd. Ilyas, drivers of trucks allegedly used in transporting the goods to its office. Mr. Yogesh Sharma and Mr. Sita Ram were not made available for cross-examination. An affidavit of Mr. Mohd. Iliyas was tendered in which he stated that he used to be approached by Mr. Dubey who was engaged by purchasers of gutka on cash basis. He stated in the affidavit that seizure of 40 bags from his tempo without bill was a sporadic event. 48. The other statement in this regard on which reliance was placed was of Mr. H. Sunder. The case of the noticees was that the statement made by him on 5th July 2003 was dictated by the officers of the Department and he was forced to sign certain documents. It is stated that he was forced to deposit ₹ 66 lakhs although only 210 bags of gutka were recovered from M/s. Singhal Transport Co. One witness who was offered for cross-examination was Mr. Paramjeet Singh Kakkar, Proprietor of M/s. Singhal Transport Co. He initially gave a statement that they transported only Vimal brand gutk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs was not examined. It was for the Department to establish the link between such evidence and VCPL. If CESTAT was not prepared to rely on the above evidence, then certainly its approach could not be faulted. The production capacity 51. On the question of production capacity, what has come on record is that at the time of inspection 65 machines were found installed and 20 were found working beyond 5 pm. Although there were 120 machines in all, 65 were found to be operational. At the relevant time, what was declared to the Department by VCPL was 65 machines. As rightly pointed out by learned counsel for the noticees, and as accepted by the CESTAT, at the relevant time there was no bar against an Assessee having more machines than what was declared as long as the machines that were operational tallied with the number declared. This aspect of the matter was overlooked by the CCE and the fact that there were 120 machines was taken to mean that they ought to have been used in manufacturing excess quantities of gutka which were clandestinely removed without payment of excise duty. Other seizures 52. In connection with the seizures from two dealers in Jaipur, three persons wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,97,04,300 based on the records of Gopi Road Lines cannot be sustained. 55. Turning to the allegation that 2267 bags of Vimal brand gutka were removed by VCPL through M/s Harsh Transport Co. Pvt. Ltd., the statements of Mr. Ravi Bhandari and Mr. Santosh Kumar Mishra were sought to be relied upon by the Department. Mr. Ravi Bhandari in his cross-examination stated that he was not aware of the brand name of the gutka booked under the GRs in question. Mr. Santosh Kumar Mishra gave an affidavit retracting his statement implicating Mr. Dubey. 56. Even as regards the seizure at Laxmi Freight Carriers, as pointed out by the CESTAT, inferences were sought to be drawn on the basis of a few telephone calls between Mr. R.K. Tripathi and Laxmi Freight Carriers. No documents showing booking of any consignment of gutka through Laxmi Freight Carriers by VCPL were able to be produced. 57. As regards the Department's appeals, cogent reasons have been given by the CESTAT for affirming the order of the CCE arising from the first SCN to the extent that the proceedings against VCPL regarding seizure of 9356 kgs of supari etc., against Ashoka Tobacco relating to seizure of 27382 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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