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TMI Blog2017 (2) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors themselves, what is clear is that the same is in tune with the documentary evidence - We find that no person has given any statement under section 14 of the Act that the goods were diverted nor any such duty free goods were seized by the Revenue outside the factory of the Appellant - the allegation of diversion was not based on any concrete material but rather only on suspicion and without any real basis. In light of this oral and documentary evidence, we find that the allegation / contention of the Department that the raw materials bought by the Appellant from 14 suppliers was diverted and never brought to the Appellant's factory, cannot be sustained. None of these decisions lay down any law which would enable the CESTAT or the authorities below to ignore documentary evidence and only rely upon the oral statements made by the transporters of the 14 suppliers as well as the estranged brother of one of the Directors of the Appellant - Appeal disposed off. - CENTRAL EXCISE APPEAL NO.213 OF 2007, CENTRAL EXCISE APPEAL NO.105 OF 2010, with CENTRAL EXCISE APPEAL NO.263 OF 2007, - - - Dated:- 25-1-2017 - S.C. DHARMADHIKARI B.P. COLABAWALLA JJ. Mr D.B. Shroff, Sr. Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyce Manufacturing Co.Ltd., reported in 2004 (175) ELT 656 ? (5) Whether in the facts and circumstances of the present case, duty will be payable by the consignor or the consignee, in terms of Notification No.1/95 dated 4th January 1995? 4. Similarly, Central Excise Appeal No.263 of 207 was admitted on 12th November, 2009 on the following substantial question of law:- (1) Whether the Tribunal was right in imposing the penalty on the Appellant under rule 209A of the Rules in spite of the fact that none of the ingredients of offence under rule 209A exists? 5. Central Excise Appeal No.105 of 2010 is filed by the Revenue. This appeal was admitted on 17th March, 2010 on the following substantial questions of law:- (1) Whether the CESTAT has jurisdiction to reduce the mandatory penalty imposed under section 11AC and Rule 209 of Central Excise Act without assigning any reason? (2) Whether the CESTAT is justified in waiving the penalty on the Managing Director and Director of the Assessee under Rule 209A even though they were incharge of the illegal activity of the Assessee? (3) Whether the CESTAT is justified in reducing the penalty on the Executive Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant's unit has been set out in paragraph 11 of the Memo of Appeal. (c) Pursuant to certain intelligence regarding purported diversion by the Appellant of the aforesaid duty free yarn to the Domestic Tariff Area (for short, DTA ), the Officers of the Director General, Central Excise, Intelligence, Mumbai (for short, DGCEI ) visited the factory of the Appellant on 9th July, 1998. Thereafter, the said DGCEI Officers once again visited the factory of the Appellant on various dates in July and August 1998 and conducted a stock search of the goods lying in the factory premises. During this time and even thereafter, the statement of Mr Manikchand G. Sharma, Executive Director of the Appellant, was recorded under section 14 of the Central Excise Act, 1944 on 9th July 1998, 6th January 1999, 5th June, 1999 and 6th March, 2000 respectively. Similarly, on 17th September, 1998, the statement of Mr Rajesh Agrawal, Export Executive of the Appellant, was also recorded. During the search conducted, samples were drawn and were sent to Silk and Art Silk Mills Research Association, Mumbai for ascertaining the blend composition and denierage of the yarn contained in the fabrics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of STML) respectively, under Rule 209A of the Central Excise Rules. (f) Being aggrieved by the said order, the Appellant along with others approached the CESTAT invoking its appellate jurisdiction under section 35B of the Central Excise Act, 1944. The CESTAT, by its order dated 28th May 2007, (a) upheld the demand of duty of ₹ 5,26,56,632/- alongwith interest on the Appellant; (b) set aside the penalty of ₹ 50,00,000/- each on Shri Vinod Kumar Deora and Suresh S. Deora; (c) reduced the penalty imposed on the Appellant to ₹ 25,00,000/- and (d) reduced the penalty on Mr Manikchand G. Sharma to ₹ 10,00,000/-. (g) As mentioned earlier, being aggrieved by this order, the Appellant STML as well as Mr Manikchand G. Sharma (a Director of STML) is before us in Appeal under section 35G of the Central Excise Act, 1944. The Revenue is also in Appeal before us in so far as the penalty was reduced not only against the Appellant STML but also against Mr Manikchand G. Sharma. 8. In this factual backdrop, Mr Shroff, learned Senior Counsel appearing on behalf of the Appellant, submitted that in the present matter, it is the case of the Revenue that not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s brother who was an estranged relative. The statement given by the said brother was to the effect that his firm never carried out any job work for the Appellant. However, the Tribunal totally ignored the fact that his own employee had given a statement to the effect that they did carry out the job work for the Appellant. 11. Mr Shroff next submitted that the CESTAT relied upon the statements of the transporters (not booked by the Appellant but by their suppliers) who stated that they did not transport any of the raw materials to the Appellant's EOU factory. However, what the CESTAT ignored was the fact that there was evidence that these transporters transported the raw materials from the respective suppliers to the Appellant's godown at Bhiwandi and from there it was transported by the Appellant's own transport vehicles. He submitted that the contention of the Revenue that not a single piece of raw material purchased from the 14 suppliers came into the Appellant's EOU for manufacture of fabric during the period 1995- 1998, is manifestly untenable in view of the following facts:- (i) The Appellant's factory was under physical control at all times by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further documentary evidence to show that there was no merit in the contention of the Revenue that not a single piece of raw material (yarn of different qualities) was received in the Appellant's factory. In this regard, he submitted the following:- The yarn was received in the factory alongwith an invoice and AR 3A form. This form was signed by the Excise Officer as also the Appellant's authorised signatory. One copy was kept with Appellant. One copy was sent to the Range Jurisdictional Officer in charge of the suppliers' factory. Within 24 hours of receipt of the goods the Appellant intimated the Department through a D3 Intimation, i.e. the document showing the receipt of raw materials of their arrival. The Excise Officer came and verified the AR 3A, D-3 Intimation and Bond Register and signed the same. The D-3 Intimations that were regularly filed by the Appellant, recording the receipt of material into the factory from each of the 14 suppliers are contemporary documents. These D-3 Intimations have been duly verified and signed by the Central Excise Inspectors. When the yarn is removed for manufacture, the Appellant issued slips and issued the yarn for ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. Mr Shroff submitted that the transportation of yarn upto Bhiwandi was through the suppliers' transporters and thereafter, from Bhiwandi to the factory of the Appellant, was done by the Appellant by their own transport vehicles for which there were no bills. This alone, with nothing more, could not have led the CESTAT to come to the conclusion that not a single piece of raw material reached the Appellant's factory. When this fact is taken into consideration and it is admitted that the transport of raw materials was done by the Appellant's suppliers upto Bhiwandi, then the statements recorded of the suppliers' transporters, does not carry the case of the Department any further. This is more so when one takes into consideration the voluminous documents that clearly establish that the raw materials reached the Appellant's factory which was thereafter used for the manufacture of final products and which were then exported, was the submission. 15. Mr Shroff further submitted that what is also important to note is that the entire export obligation of the Appellant was completed by them and no dispute in that regard has been raised by the Development Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s contention is based on the following:- Statements of the 14 suppliers who have stated that the duty free yarn was supplied by them upto Bhiwandi as per the request of the Appellant. In fact, in two cases yarn was picked up from the premises of the supplier by the Appellant. Statement of transporters who stated that they have delivered the duty free goods upto Bhiwandi, at the transporters/suppliers premises or claimed to be that of the Appellant. The vehicles in which yarn is said to have been transported from Bhiwandi to Mumbai are not corroborated by the octroi records, nor there are any records to show the delivery of the goods at the premises of the Appellant. The Appellant did not have any machinery installed for weaving of fabrics and claimed to have permission for sending yarn for job work to Bhiwandi. The Appellant had claimed that the duty free yarn in question was sent for weaving on sub-contract basis to four job workers. Investigations conducted revealed that one unit was not in existence. The Director of two units denied of having done any job work on behalf of the Appellant. The fourth unit claimed to have done job work for the Appellant, but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso considered by the Commissioner in his order and the same was also upheld by the CESTAT. He therefore submitted that there is no merit in the contention of the Appellant that there is any denial of the principles of natural justice. 20. Mr Bangur submitted that the Appellant has repeatedly contended that they have received all the raw materials in their factory and used the same for manufacture of exported goods. In support of their contention, the Appellant has referred to the Re-warehousing Certificates duly signed by the jurisdictional Central Excise Officers; D-3 Intimation filed with the Department; documents regarding removal of yarn and receipt of ready-made fabrics from job workers which were countersigned by the Central Excise Officers and shows that the goods were received and duly consumed within the factory for discharging the export obligation. In this regard, Mr Bangur submitted that the Commissioner has opined that though the unit was supposed to be in physical control of the Excise Officer, no Excise Officer was stationed in the unit. No Officer was appointed to exclusively look after the work of STML. The Officers were given charge of many units and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the Revenue that no raw material (i.e. yarn of different qualities purchased by the Appellant from 14 suppliers) came into the Appellant's EOU for manufacture of fabrics during the period 1995-1998. According to the Revenue, the entire quantity of raw material was diverted as there was no evidence of transportation of raw material from Bhiwandi to the Appellant's factory. To come to the aforesaid conclusion, the Revenue and the CESTAT purported to rely upon the statement of a brother of one of the Appellant's Director who stated that his firm never carried out any job work for the Appellant. Over and above this, the Revenue and the CESTAT also relied upon the statements made by the transporters of the suppliers that they did not transport any of the raw material to the Appellant's EOU factory but the same was done only upto Bhiwandi. It is basically on these oral statements recorded under section 14 of the Act that the Revenue and the CESTAT came to the conclusion that the raw materials purchased by the Appellant from the 14 suppliers never reached the factory of the Appellant but in fact were wrongly diverted. 23. We find considerable force in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 65 of the said Act. Please state what kind of control your were exercising on the said unit, with whom keys of bonded warehouse were kept? Ans. Though the unit was granted licence for private bonded warehouse and permission for manufacturing in bond as stated in the question above, I was posted to the range wherein I was allotted other units too, and I used to visit the factory of M/s Santogen Textile Mills Ltd. 100% EOU in verification of receipt of duty free raw material as intimated by D-3 filed by them. I have also attended to exports of the above said party as and when intimated to me. Within the premises of M/s Santogen Textile Mills Ltd. 100% EOU a small portion was kept under lock and key wherein one set of keys were kept in the range office. Q.6 What documents you used to receive alongwith D-3 intimations? How D-3 was handed over to you? Had you kept any D-3 Register in range office? Ans. The party M/s Santogen Textile Mills Ltd. 100% EOU, used to submit 3 copies of AR3 and Central Excise Invoice alongwith the D3 intimation. D3 intimation used to be sent to the range office through the messenger of the party and thereafter I used to go to verify th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt of goods, in factory of M/s STML ? Ans. Whenever I used to visit the factory to verify the receipt of goods under D-3, the goods used to be unloaded in the factory premises and I have never seen the vehicle in which they were delivered. I would once again like to state that whatever D-3's and AR3A's rewarehousing certificates which have been signed by him are in token of physical checking and verifying the material so received and whenever any discrepancies were noticed, I had made it a point to mention in AR3A'2 rewarehousing certificates. 26. Similar evidence was given by Shri Ashok Kumar Karan. In his statement dated 8th August, 2000, He has stated as under:- Q.6 Have you verified every D3 intimation received from Santogen (100% EOU) ? Ans. I have verified every D-3 intimation received from Santogen (100% EOU). Q.8 Give a list of D-3s verified by you as per the Proforma shown to you? Ans. I have prepared a statement showing details of D-3s verified by me, I am producing the same before you. 27. Thereafter, a statement of Shri Arvind Rabhaji Said, Inspector, Central Excise, Bhandup Division, Mid-town Plaza, Mulund Check Naka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no.1 to 288 tendered by M/s Santogen Textile Mills Ltd. I have signed first and last page of the said file in token of having seen and perused the same. I wish to state that signatures appearing on pages nos.211 to 287 of the said file as the Central Excise Officer in charge of (100% EOU) are my own signatures. The signatures appearing on part C (to be filled by sub-contractor) have been made after verifying the receipt of process goods and waste shown in the respective Part C challan. I have also countersigned the production register after verifying processed goods received in the factory premises of M/s Santogen Textile Mills Ltd. (100% EOU). 29. Looking at all this evidence that has been recorded of the Excise Inspectors themselves, what is clear is that the same is in tune with the documentary evidence. The preponderance of probabilities is therefore in favour of the Appellant. Looking to these facts and evidence, we find it difficult to sustain the conclusion of the CESTAT that not a single piece of raw material (yarn) reached the Appellant s factory, which in turn was a violation of the provisions of the Central Excise Act, 1944 and/or Notification No.1/95-CE dated 4th J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. It is not the case of the Revenue that the Excise Inspectors who were in-charge of the Appellant's factory and who have signed the various statutory registers and documents in anyway connived with the Appellant. Neither is it the case of these Officers that they were misled in putting their signatures on various documents that indicate that the raw materials reached the Appellant's factory, and were not diverted. In view of this voluminous documentary evidence read with the statements of the Excise Inspectors recorded under section 14 of the Act, we are clearly of the view that the reliance placed by the CESTAT as well as the Revenue only on the oral statements of an estranged brother of one of the Directors of the Appellant as well as the transporters of the suppliers (to come to the conclusion that the raw material yarn had been diverted), was wholly erroneous and contrary to all well known settled legal principles. It is now trite law that documentary evidence has far greater weightage against oral evidence especially when the oral evidence is contrary to the documentary evidence. This position in law is very well settled but if one needs to refer to any authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t following the judgment passed by the co-ordinate benches of the Appellate Tribunal passed in the case of Carrier Aircon Ltd. v/s CCE, New Delhi, reported in (144) ELT 170, Delhi and in the case of CCE v/s Godrej and Boyce Manufacturing Co.Ltd., reported in 2004(175) ELT 656 ? In the negative. 5 Whether in the facts and circumstances of the present case, duty will be payable by the consignor or the consignee, in terms of Notification No.1/95 dated 4th January 1995 ? Does not survive CENTRAL EXCISE APPEAL NO.263 OF 2007 [Filed by Manikchand G. Sharma] Sr.No Questions Answers 1. Whether the Tribunal was right in imposing the penalty on the Appellant under rule 209A of the Rules in spite of the fact that none of the ingredients of offence under rule 209A exists? In the negative and in favour of the Appellant and against the Revenue. CENTRAL EXCISE APPEAL NO.105 OF 2010 [Filed by The Commissioner of Central Excise, Mumbai-II] Sr.No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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