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TMI Blog2017 (3) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1. Data stored in the said laptop was retrieved in the form of print-outs. 1.3. From the said print-outs it was observed that the monthwise dispatches of "Midland" and "Red Roses" cigarettes by the Respondent No. I during the months of April, May and June 2003 were as under - Month Dispatches of "Midland" FT 10 SS Cigarettes Dispatches of "Red Roses" 10 SS Cigarettes City Village City Village April 2003 115 2904 46 207 May 2003 100 6145 141 2421 June 2003 200 4615 - - Total 415 13664 187 2828 1.4 However, in the monthly ER-i returns of M/s RCTIPL(Respondent No.1) for the months of April to June 2003 the total clearance of "Midland" cigarettes had been declared as 4150 thousand and that of "Red Roses" cigarettes as 'nil'. Thus as compared to the dispatch figures entered in the laptop of Shri Marvin Au, M/s RCTIPL(Respondent No.1) had shown less dispatches of "Midland" and "Red Roses" Cigarettes to the extent of 9929 thousand Nos. and 3015 thousand Nos. respectively in their monthly returns. 1.5 In this regard a statement of Shri Marvin Ali was recorded on 23.8.03 wherein he deposed that since April 2002 he had been working as General Manager ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lumn are projections of duty paid cigarettes. When asked to explain what he meant by "duty has not been paid", Shri Ali stated that "these were cigarettes removed without payment of excise duty by M/s RCTI (P) Ltd.". Similar assertions were also made by Shri Marvin Ali in his statement dated 15.6.05. 1.9 Thus, Shri Marvin Ali, General Manager of the Respondent No. 1 accepted and further confirmed in his all the three statements recorded under section 14 of the Central Excise Act, 1994 during a span of about two years that the figures shown in the various charts retrieved from his laptop pertained to non-duty paid cigarettes manufactured and cleared by M/s Reliable Cigarettes & Tobacco Industries P. Ltd., Mandideep. 1.10 During the search of the factory of the Respondent No. 1 on 23.8.03, the investigating officers found two files containing shift wise machine efficiency reports for the months of July and August 2003. In the reports, the efficiency of the machines had been noted in percentage and numbers. In this regard a statement of Shri Santosh Singh Thakur, Quality Control Supervisor of the Respondent No. 1 was recorded on 23.8.03. He stated that the production efficiency repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate India Ltd., Bhopal (Respondent No.3) from M/s Shalimar Cargo Movers, Bhopal to M/s Sewa Roadways, Indore. 1.16 On the basis of the details contained in the said challans, a chart (Annexure 25) was prepared incorporating details of all the shipments from M/s RCIL(Respondent No. 3) to various stations and parties as detailed in the challans (total 256 challans). Subsequently, the details contained in these challans were compared and tallied with the corresponding entries in the 'Unloading Registers' and 'Delivery Registers' of M/s Sewa Roadways, Indore. In the Delivery Register, the description of the goods was shown as cigarette, Bags, Midland, C/r cigarette, C/r Midland, Bags Cigarettes or B/L. In the Unloading Register also the description of goods was given as cigarette, bag, Midland, Bag Cig. or Car. Cigarette. 1.17 In this regard a statement of Shri Prateek Kalra(Respondent No. 5), Proprietor, M/s Shalimar Cargo Movers, Bhopal (Respondent No. 5) was recorded on 16.3.04, wherein he deposed that he had been booking goods of M/s RCIL Bhopal(Respondent No. 3) for different stations and such goods were mainly cigarettes. He added that other than cigarettes, M/s RCIL(Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transportation of goods of M/s RCIL( Respondent No.3)), prepared on the basis of Challans of M/s Shalimar Cargo Movers, Bhopal (Respondent No.5) and Delivery Register and Unloading Register of M/s Sewa Roadways, Indore. He confirmed the authenticity of the chart after comparing with the registers of M/s Sewa Roadways, and added that wherever there was a mention of "Cigarettes" or "Midland" in either of the registers of M/s Sewa Roadways, he could confirm that against corresponding GRs, M/s RCIL(Respondent No.3)) had sent cigarettes for further delivery. 1.23 From the chart of transportation of cigarettes (Annexure 25) the cigarettes dispatched by M/s RCIL (Respondent No.3)) against bills/invoices were identified and such consignments were listed in Annexure 71. From Annexure 71 it can be seen that even where the description of goods has been given as Bags, C/R in the delivery/unloading registers of M/s Sewa Roadways, the consignments pertained to cigarettes booked by M/s RCIL (Respondent No.3) under bills. 1.24 The remaining consignments of Annexure 25, (other than those included in Annexure 71) had been booked by M/s RCIL (Respondent No. 3) on the basis of kachchi parchis. In r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese Minutes, the Chairman of the Reliable Group Shri Sikandar Hafiz Khan (Respondent No. 2) directed that Shri Riyazudding Farooqui (Respondent No. 4) will coordinate with him in modernizing RCTI's existing facilities. Thus, it appeared that in practice M/s RCIL (Respondent No. 3) had been working as a Reliable Group Company and its Director was an employee of the Reliable Group. 1.28 A statement of Shri Riyazuddin Farooqui (Respondent No.4) Director of M/s Reliable Corporate India Ltd. was recorded on 23.8.03. He stated that his company M/s RCIL( Respondent No.3) is engaged in trading Midland cigarettes and about 90-95% of the entire production of Midland cigarettes of M/s RCTIPL(Respondent No.1) is purchased by them. He deposed that M/s Shiv Supari Stores, Indore (Respondent No.6) were the only distributor of these cigarettes for the state of Madhya Pradesh. 1.29 Shri Riyazuddin Farooqui (Respondent No.4) was shown the statement dated 23.8.03 given by Shri Marvin Ali, wherein he had accepted that M/s RCTIPL(Respondent No.1) had cleared non-duty paid cigarettes. Shri Farooqui was also shown the printouts retrieved from the laptop of Shri Marvin Ali in which the figures of Midlan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 Shri Farooqui (Respondent No. 4) was shown the chart pertaining to consignments of cigarettes transported through M/s Shalimar Cargo Movers, which was prepared on the basis of record seized from M/s Shalimar Cargo Movers, Bhopal and M/s Sewa Roadways, Indore (annexure 25). Shri Farooqui accepted that the consignments shown in this chart had been booked by M/s RCIL(Respondent No. 3). He stated that the consignments booked on the basis of kachchi parchis were of cigarettes meant for sales promotion. He agreed to give the details of consignments booked on kachchi parchis within 15 days. 1.34 Thus, in his statement dated 20.8.04, Shri Farooqui accepted that consignments of cigarettes of Midland brand had been booked by them with M/s Shalimar Cargo Movers on the basis of kachchi parchis without issuing any invoice in respect of the same. 1.35 As Shri Riyazuddin Farooqui (Respondent No. 4) did not produce the details of cigarettes booked on the basis of kachchi parchis, he was summoned on 2.11.04 and his statement was recorded under Section 14 of the Central Excise Act, 1944. Shri Farooqui stated that the consignments of cigarettes booked on the basis of kachchi parchis were receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sent through him were unloaded at Mandideep only. He stated that the bilties of these consignments had been issued by M/s Reliable Carriers (P) Ltd., Indore. It is pertinent to note that M/s Western Tobacco Ltd., Mandideep (M/s WTL) is a sister unit of the Respondent No. 1 and is situated adjacent to the factory of the Respondent No. 1. M/s Reliable Carriers (P) Ltd. is also a company belonging to the "Reliable Group". 1.40 Shri Yusuf Shaikh produced photocopies of Driver Copies of eight such Goods Consignment Notes which were available with him. In 6 of these Goods Consignment Notes (GCN), M/s Western Tobacco Ltd., Mandideep had been mentioned as the consignee. One GCN [No. 25688 dated 19.8.03] had the name of M/s RCTI as the consignee. In the remaining one GCN [No. 25694 dated 19.8.03] there was no mention of the consignee. The scrutiny of these two GCNs revealed that GCN No. 25688 dated 9.8.03 was in respect invoice No. 267 and GCN No. 25694 dated 19.8.03 was for invoice No. 296 of M/s HFL Ltd. Under each of these GCNs (Driver's copy), 37 bags of filter rods were shown to have been received by the same person at M/s RCTPIL. As the name of the consignee in the drivers copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., Shri Satish Kumar Jam deposed that under that consignment note 37 cartons were shown to have been dispatched to M/s Surya Trading Co, Jabalpur but factually the said goods had been delivered to Respondent No. 2 as was evident from the 'Driver's Copy' of the consignment note. He admitted that in all such cases, the 'Consignor Copy' and 'Consignee Copy' of the consignment notes were lying in the files of M/s HFL. 1.44 Regarding amendments done on invoice No. 232 and Bilty No. 59256 dated 12.7.03, he deposed that they had received demand drafts from M/s Surya Trading Co. for 19 cartons and L.C. from M/s WTL for 104 cartons and all these cartons were loaded in truck No. MP-07/7024 of M/s Khandelwal Transport against bilty No. 59256. However, on 13.7.03, Shri Manohar Jam of M/s Khandelwal Transport told him that they had unloaded all 123 cartons at Mandideep. He (Shri Satish Kumar Jam) requested Shri Manohar Jam to correct the name of consignee in respect of 19 cartons as M/s Surya Trading Co. and issue another consignment note for 104 cartons in favour of M/s WTL. He, however, added that since there was no request from M/s Surya Trading Co. for shifting 19 cartons from Mandideep, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hour shift duty. 1.48 A statement of Shri Sikandar Hafiz Khan (Respondent No. 2) was recorded under section 14 of the Central Excise Act, 1944 on 9.9.03. Shri Khan was shown the statement dated 23.8.03 of Shri Marvin Au, General Manager of Reliable Group. On going through the statement Shri Khan (Respondent No. 2) accepted that "it reflects that goods (Midland 69 / Red Rose plain) cigarettes have been clandestinely manufactured and removed from our factory without payment of duty. As regards quantum of goods removed and duty payable thereon I will investigate the matter from all the concerned officials and inform you within 10 days". 1.49 During the course of investigation, the Respondent No. 1 also deposited an amount of Rs. 25,00,000/.. towards partial payment of duty payable on the cigarettes clandestinely removed by them. 1.50 As no further information was provided by Shri Sikandar Hafiz Khan(Respondent No.2) as promised in his statement dated 9.9.03, summons dated 10.8.04, 2.3.05, 23.3.05, 20.4.05, 27.4.05 and 6.5,05 were issued to Shri Sikandar Hafiz Khan(Respondent No.2) by the officers of DGCEI. Shri Sikandar Hafiz Khan(Respondent No.2), however, did not cooperate with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikandar HafizKhan (Respondent No. 2) is Chairman cum Managing Director. 1.54 Thus it appeared that Shri Sikandar Hafiz Khan(Respondent No.2) is liable to imposition of penalty under rule 26 of the Central Excise Rules, 2004. Penalty under Rule 26 ibid also appeared to be imposable on Shri Om Prakash Wadhwani (Respondent No. 6), Proprietor of M/s Shiv Supari Stores, Indore (Respondent No. 6) who is the sole distributor of the cigarettes of brands of M/s RCTIPL(Respondent No.1) for the state of Madhya Fradesh. 1.55 Thus, from the challans of M/s Shalimar Cargo Movers, Bhopal and delivery/unloading registers of M/s Sewa Roadways, Indore it appeared that the Respondent No. 1 had during the period November 2001 to February 2003 transported 7016 cartons of Midland cigarettes in respect of which no corresponding invoice of M/s RCIL( (Respondent NO.3)) or M/s RCTIPL(Respondent No.1) was available evidencing duty payment on the same. These consignments were booked for transportation by M/s RCIL( (Respondent NO.3)) on the basis of kachchi parchis. The total Central Excise duty which appeared to have been evaded by the Respondent No. 1 on these 7016 cartons of Midland cigarettes amounted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , General Manager of the Respondent No. 1, SI-wi G. S. Ramakrishna, General Manager (Production) of the Respondent No. 1, Shri Riyazuddin Farooqui (Respondent No.4), Director of M/s RCIL( Respondent No.3)), Bhopal, Shri Prateek Kalra(Respondent No. 5), Proprietor of M/s Shalimar Cargo Movers, Bhopal, Shri Vijay Kalra, Proprietor of M/s Sewa Roadways, Indore and Shri Satish Kumar Jam of M/s Hindustan Filter Ltd., Dewas were cross examined before the adjudicating authority. 1.60 During the cross examination of Shri Marvin Ali on 17.3.08, he stated that "I was asked to state like this by the Departmental officers. I was threatened of dire consequences if I do not say as stated by the officers. I was informed that I would not be targeted if I cooperated with them." Shri Marvin Ali informed that he had received a notice dated 10.8.06 from M/s Reliable Cigarettes & Tobacco Industries Pvt. Ltd. asking for damages caused to them due to the statements given by him before the Central Excise authorities. He then filed an affidavit before the Court of Additional Judicial Magistrate, Bhopal stating that his statement had been recorded by the officers under threat. In this regard he produced co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. 1.64 Shri Riyazuddin Farooqui (Respondent No.4), Director of M/s RCIL( (Respondent No..3)) was cross examined on 28.4.08. He stated that his statement dated 23.8.03 had been recorded under force. He stated that the figures of dispatches of cigarettes retrieved from the laptop of Shri Marvin Au were only projections made by Shri Marvin Au. He was forced to state that these are manufactured cigarettes dispatched by RCTI to RCIL( (Respondent No.3)). He claimed that he did not retract his statements earlier as he had been threatened that if he retracted the statements the officers would take by force similar statements and keep him under confinement. Therefore he was waiting for an opportunity where he could bring out the correct facts supported by documents. 1.65 Shri Farooqui, further narrated that the items transported by M/s Shalimar Cargo Movers on kackchi parchis were not cigarettes manufactured by RCTI but were publicity materials such as POP (Point of Purchase) advertisement materials, danglers, posters, stickers, bardana, confectionary etc. belonging to one M/s. R. S. & Company at 77, A & B, SDA Annexe, Dewas Naka, Indore (M.P.). 1.66 Shri Farooqui stated that this comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven when cigarettes were being sent the consignment notes many a time used to describe them as bags, cartons, CFCs, etc. 1.70 He further narrated that from December 2002 M/s R. S. & Company changed the printer from M/s. Chitra Sales, Bhopal to M/s. Consotech Engineering Services, Bhopal. This Respondent No. 1 used to entrust POP advertisement material to him for transportation from Bhopal to Indore and other destinations. 1.71 He stated that no occasion M/s RCTI (Respondent No.1) gave him any free cigarettes to distribute as promotional materials. 1.72 Shri Vijay Kalra of M/s Sewa Roadways, Indore was cross- examined before the adjudicating authority on 28.4.08. Shri Vijay Kalra stated that the description of goods has been mentioned as cigarettes in their delivery/ unloading registers on the basis of bilties of M/s Shalimar Cargo Movers, Bhopal. Shri Vijay Kalra was asked to explain how in certain cases the description of goods has been entered as 'cigarettes' in his registers when the description of the goods was not mentioned in the challans/bilties of M/s Shalimar Cargo Movers. He stated that the goods came in plain gunny bags and since they did not open the packs to find ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty. 1.78 They submitted that the notice has misinterpreted the entries in the challans and registers pertaining to POP (Point of Purchase) advertisement materials to be cigarettes. As shown by Shri Riyazuddin Farooqui (Respondent No.4), the consignments were not of cigarettes but only of POP publicity material relating to products such pan masala or gutkha of M/s R, S. & Company, Indore. 1.79 The Respondent No. 1 stated that in the transport documents the description of the goods had been given as bags. The Department has treated the number of bags to be the number of CFCs of cigarettes and demanded duty. However, the contents in a bag could never be known to the transporter and consignor was not inclined to state what was contained in the bags. Obviously there has been assumption that whatever has originated from Reliable, RCIL( Respondent NO.3) etc. is also cigarettes which is incorrect. It was only a guess made by M/s Shalimar Cargo Movers that there were CFCs of cigarettes in the gunny bags. 1.80 They submitted that the Challans recovered from the premises of M/s. Shalimar Cargo Movers, Bhopal do not conclusively prove that they have indeed transported cigarettes clandest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inspectors posted in their factory throughout the period of demand. 1.84 They stated that it has not been shown how the following raw material required for manufacture of 83104000 cigarettes was procured by them: SI. No. Item Quantity Required 1. Cig. Paper 803 Bob 2. PCT 373.968 Bob 3. Filter Rod 13845.1264 M 4. Alu. Foil 712.28 Bob 5. BOPP Film 1773.44 Kgs 6. TOR 183 rolls 7. Shell 8310 M 8. Slide 8310 M 9. Gaywrapper 332.41 M 10. CFC 6922.56 Nos. 11. Masking Tape 332 Kgs. 12. Fevicol Max 1121.9 Kgs. 13. Fevicol PPA 332 Kgs. 14. Ramacol Ghg. 207.76 Kgs. 15. Cut Tobacco 57465 Kgs. Thus, the Respondent No. 1 submitted that the show cause notice was wholly unsustainable and liable to be dropped. 1.85 The Commissioner has in the impugned order observed that there is force in the Respondent No. l's submission as there are many entries in the chart appended to the notice as annexure 25 where the description of goods is mentioned as 'Bags", 'B/L', 'b/d', 'b/d Mv goods', 'POP'. In these entries there is no mention of cigarettes. Therefore, without any corroborative evidence these entries cannot be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther during search of alleged consignee Shiv Supari Stores, Indore on 23.08.2006 also neither non duty paid cigarettes nor any unaccounted cash could be recovered or seized by the investigating Officers. 1.89 The Commissioner has therefore held that there is force in M/s RCTI's submission that the challans recovered from M/s Shalimar cargo Movers, Bhopal do not conclusively prove that they have transported cigarettes clandestinely without payment of Central Excise Duty. 1.90 The Commissioner has observed that during cross examination Shri Prateek Kalra(Respondent No. 5) has held that the statement dated 16.3.04 was recorded by force. He has observed that POP advertising material having no commercial value was received by them in kachchi parchies. The Commissioner has also observed that investigation has failed to produce any evidence regarding actual payment of double charges by M/s RCIL (Respondent No.3) to M/s Shalimar Cargo Movers. 1.91 The Commissioner has further observed that Shri Vijay Kalra of Sewa Roadways, Indore in his statement dated 6.4.04 has categorically mentioned that they had been making entries in their registers on the basis of GRs/Bilties of M/s Shalimar C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for any assessee to remove any goods clandestinely from their factory under physical control without the connivance of the Departmental officers posted therein. There is no allegation of any collusion of the Departmental officers with M/s RCTI. Further, the Commissioner has held that five-hour time during which the Inspector posted at RCTI might have supervised clearances of M/s WTL, is not sufficient to bring inside the factory all the raw materials required to manufacture cigarettes to be removed clandestinely, process them, manufacture cigarettes, pack them and remove the same clandestinely. 1.95 The Commissioner has held that huge quantities of other raw material were also required for manufacture of the cigarettes alleged to be removed clandestinely, for which no evidence has been collected by the investigation. 1.96 The Commissioner has held that in case of units under physical control, there is very heavy onus on the department to prove the suppression of production and clandestine removal. In case of M/s Nortan Intee rubbers Pvt Ltd Vs CCE [2004(164)ELT5(Mad)j the Hon'ble high Court has observed that "when the unit was under physical control of the Excise department, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than what has been recorded and allegation of clandestine clearance has been raised on the basis of shiftwise machine efficiency reports recovered during the search for pertaining to the months of July and August, 2003. These reveal higher production of Midland cigarettes than the recorded production of the respondent. This fact has also been confirmed by Shri G.S. Ramakrishan, General Manager (Production). However, these records have not been given credence by the ld. Commissioner citing the reason that Shri G.S. Ramakrishna at the time of cross examination has virtually retracted his earlier statements. Revenue has claimed that the explanation given by Shri Ramakrishna at the time of cross examination was actually incorrect and the adjudicating authority erred in not verifying the details quoted by him. (iii) Investigation revealed that the entire production of cigarettes by the respondent was sold through M/s Reliable Corporate India Ltd., Bhopal. The receipt of clandestinely cleared cigarettes have been at tested by Shri Riyazuddin Faroowqui, Director of M/s Reliable Corporate India Ltd. However, the adjudicating authority has ignored the statement on the basis of retraction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment has been retracted subsequently. During the course of examination by the adjudicating authority, he has categorically asserted that all the statements were recorded from him under duress with the threat of arrest. Commissioner has taken the view that no credence can be given to such retracted statement of Shri Ali. Such retraction also has been made by Shri Ali before the civil court, Bhopal. It has also been submitted by the respondent that the computer printout does not satisfy the terms of Section 36B of the Central Excise Act. Section14 of the Central Excise Act empowers the departmental officers to record the statement of witnesses which are formally admissible as evidence. However, in the present case almost all the statements have been categorically retracted. We also observe that the details are available in the laptop only for a period of three months. Section 36B specifies that computer printout will be admissible only when it is established that the computer has been used regularly in the ordinary course of activities to store such information. Since, this aspect has not been established; the adjudicating authority has rightly chosen to disregard this piece of evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In our view the adjudicating authority has dealt with the efficiency reports in a convincing manner and the findings on this ground cannot be disputed. 9. Another ground for alleging clandestine removal is that some consignments of filter rods consigned M/s Surya Trading, were delivered at the factory of the respondent. These filter rods were manufactured by M/s Hind Filters and the supplier has admitted, during cross examination that they have not received any payments for the filter rods stated to have been delivered to the respondent's factory. Even as per the documentary proof available with the department, out of eight consignments, six consignments were consigned, not to the respondent, but to M/s Western Tobacco. Even in respect of balance of two consignments, the department never established receipt of the goods at the factory of the respondent and the statements made in the cross examination have conclusively showed that this evidence has been rebutted. The other serious ground on which the adjudicating authority has set aside the demand was that the respondent's factory was under physical control and no collusion has been established between the officers in charge o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no clandestine removal in this case to summaries that there was no clandestine removal stands established from the following facts: * There was no recovery of any documents pertaining to alleged clandestine removal from the factory of the noticees. * There was no evidence of production and clearance of cigarettes clandestinely without payment of duty. * No buyer of such clandestinely produced cigarettes has been identified. * There was no evidence of procurement of corresponding quantity of raw materials viz. purchase of tobacco, chemicals, cigarette paper, packing material etc. * There was no discrepancy found in regard to manufacture of cigarettes in the factory. * Cigarette was under physical control throughout the period. Hence there was no question of clandestine removal. * There is no evidence of receipt of any payment for such alleged clandestinely removed cigarettes worth Rs. 58127560.00. * There is no evidence of payment made towards purchase of raw materials worth Rs. 1.77 crores required for manufacture of such a huge quantity of alleged clandestinely removed cigarettes. 28.44 Thus, in view of the above, it stands proved conclusively that M/s RCTI have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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