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TMI Blog2019 (8) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... and required to be proved beyond doubt by the Revenue and cannot be upheld merely on the basis of statements which are based on memories. In the present case, as already observed the Revenue s entire case is based upon statements which in turn are as regards explanation of various entries in the records maintained by such deponent. In case of clandestine removal, the goods are first required to be manufactured for which purpose a manufacturer needs lot of raw materials - There is no evidence of procurement of excess raw materials. Admittedly the manufacture of Zarda requires a number of raw materials, the main being raw Zarda. Apart from that Glycerin and other chemicals like Benzyl Burate, Methyl Phenyl Acetate compounds, fragrances and packing materials in dibbies. Apart from alleging the procurement of excess raw tobacco, M/s.Niranjan Tobacco Company, which is also based upon the records maintained by the said raw material saler, Revenue has not made out any efforts to identify the supply of the other materials required for manufacture of such a huge quantity of Zarda. There is neither any allegation to the effect of unaccounted procurement of other raw materials. We reall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst Schedule to the Central Excise Tariff Act, 1985. Their factory was visited by the Central Excise officers on 21 September 2011, who conducted various checks and verifications. Certain records were resumed by the visiting officers under the Panchnama dated 21 September 2011. However, no variation, either in the stock of raw material or final product was detected. 3. As it was gathered that the appellants were selling their final product Zarda by railways, a team of the officers of DGCEI visited the inward godown of parcel office, railway station, Sealdah and found 40 cartons bearing a mark Red-50 Blue 50 and opined that the said consignments were containing Zarda transported from Varanasi to Sealdah. The name of the consignor and consignee was mentioned as Raju in the RRs. Nobody came forward to claim the ownership of the said goods and by entertaining a belief that the said goods have been cleared from the factory of M/s.Kishore Zarda, they were seized as un-claimed under Panchnama dated 21 September 2011. On the subsequent date i.e. 22 September 2011, the godown of the said railway station was again visited by the Central Excise officers and 3(three) mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under cover of Bill are made vide cheques and whenever the goods are received without invoices, consideration is paid by cash. Scrutiny of the records maintained by M/s.Khandelwal Surti House led the Revenue to belief that he has received goods involving duty of around ₹ 8.19 Lakhs from M/s.Kishore Zarda without payment of duty. 6. In the above backdrop, the further investigations were conducted by the Revenue and the statements of Shri Chandra Kishore, partner of M/s.Kishore Zarda was recorded on various dates. In his statement, Shri Chandra Kishore disclosed the names of the booking agents as also various transporters through whom their final product was being transported. He also disclosed the names of the suppliers of various inputs like raw Zarda, Glycerin and other chemicals viz. Benzyl Burate, Methyl Phenyl Acetate compounds, fragrances and dibby and cartons. Further the details of their customers were also disclosed. He also further deposed that some of the customers takes the delivery of the Zarda at the factory gate itself and the rest of the customers of Uttar Pradesh gets Zarda through transportation and the freight is borne by him. Zarda is sent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellants before Commissioner(Appeals), who vide his Order-in-Appeal No.28,29,30/CE/Alld./2014 dated 31 March 2014 set aside the order of the original adjudicating authority by observing that the onus to prove that the goods found at Sealdah Railway Station were booked by M/s.Kishore Zarda Factory is required to be discharged with affirmative evidence, which the Revenue has failed to do so. The reliance by the Revenue upon the statements of various persons including Shri Priyadarshan Barua and Shri Chandra Kishore, Partner was not appreciated by Commissioner(Appeals) by observing that though the statements recorded during investigation is vital piece of evidence, but as per the established law, in the case of allegation of clandestine manufacture and removal of the goods, the burden lies heavily upon the department to prove the same with positive evidences. The statements are required to be compared with the rest of the records, which has not been done by the Revenue. He further observed that over-emphasis has been given to the statements recorded during the investigation, without any verification etc.. He also observed that during the visit of DGCEI at the factory of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transporter s end Shree Shakti Carrier, Guwahati, read with the statements of their representative along with the scrutiny of records maintained by the said transporter and the statements of various authorized representatives of retail stock. The said show cause notice culminated into an order impugned before us passed by the Commissioner confirming the demands as proposed in the notice as also imposing penalties, detailed in the preceding paragraphs. 11. After hearing both sides duly represented by Shri Abhinav Mehrotra, learned Advocate along with Shri Abhisek Panday, learned Advocate and Shri Jitendra Yadav, learned Advocate for the appellants and Shri Gyanendra Kumar Tripathi, learned Authorized Representative for the Revenue, we note that the appellants factory premises were put to search on 21 September and the visiting officers undertook the stock verification of various raw materials as also final product. All the raw materials, packing materials, perfumery compounds were verified and found to be tallying with the records as maintained by the appellant in their books of accounts. Further no shortage or excess or any other variation was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating authority. On one hand, learned Commissioner is accepting that the Revenue s case is based upon the statements of the witnesses and the cross-examination, as per the settled law, should generally be allowed. On the other hand he is disallowing the cross-examination by referring to Supreme Court s decision which is only to the effect that such request should be considered in the light of the facts and circumstances of the each case. The adjudicating authority has not gone further and dealt with the cross-examination request by discussing as to how the said request is not proper, in the facts and circumstances of the case. If the adjudicating authority is not intending to allow the cross-examination, the statements have to be kept out of consideration. He has never deliberated upon the fact as to how the cross-examination is not justified in the facts and circumstances of the present case. The only reasoning adopted by him for such denial is that the statements stand further corroborated with the documentary evidences recovered from various persons. However, it has to be kept in mind that these documentary evidences, to which he is referring to are also the documents obtaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Govind Mills Ltd. [2013 (294) ELT 369(HC-All.)] and has observed that since in that case there was only one statement relied upon by the Revenue, the Hon ble High Court held in favour of the assessee. We do not appreciate the above artificial differentiation drawn by the adjudicating authority for the purpose of refusing to allow the cross-examination. A reading of the one liner differentiation in the order leads us to believe that the adjudicating authority was in a hurry to confirm the demands without observing the principles of natural justice Having held that denial of cross-examination has led to violation of principles of natural justice and in such a scenario the statements have to be kept out of consideration, we proceed to decide the other evidences relied upon by the adjudicating authority to arrive at the findings of clandestine removal. By following the said precedent decision of the Tribunal, wherein the entire case law stands discussed, we are of the view that the statements have to be kept out of the consideration and cannot take place of admissible evidences. Reference can also be made to another decision of the jurisdictional High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person who has made those records. The same stands relatable to M/s.Sugandhi based upon the statements of owners of those records without even identifying and examining the scribe of those entries. Having held that statements are not admissible, the entries are also required to be ignored. As such we find that in the absence of any evidence of actual manufacture of the goods or clearance of the same, the confirmation of demand based upon third parties documents cannot be upheld. 21. .. 22. At this stage we may refer to certain precedent decisions on the issue of the findings of the clandestine removal based upon the statements of various deponents, who have not been allowed cross-examination read with the entries made in the third party documents recovered from the premises of the said third parties. The Hon ble Supreme Court in the case of Andaman Timber Industries v. Commissioner of C.Ex., Kolkata-II reported as MANU/SC/1250/2015, while dealing with the cross-examination of the witnesses observed that not allowing the assessee the cross-examination of witnesses is a serious flaw which makes the order nullity inasmuch as the same amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prosecution. The evidentiary value of the statement, in so far as proving the truth contents thereof is concerned, is completely lost unless and until the case falls within the parameters of section 9D and otherwise it has to be held that adjudicating authority has relied on irrelevant material. If the procedure, which is statutorily prescribed by plenary parliamentary legislation, is not followed, it has to be regarded that the Revenue has given up the said witnesses so that the reliance by the Commissioner on said statement has to be regarded as mis-guided and the statements have to be eschewed from consideration as they would not be relevant for providing the truth of the content thereof. To the same effect is the decision of the Hon ble Punjab Haryana High Court in the case of Jindal Drugs Pvt.Ltd. [2016(340) E.L.T. 67 (P H)]. 15. In fact we also note that the adjudication proceedings relating to the seizure portion of the entire case, emanating from the same set of facts and circumstances was dealt with by Commissioner(Appeals) and was held in favour of the assessee. The said order stands accepted by the Revenue and was not appealed against. The Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andestine/disproportionate/unaccounted purchase, receipt and consumption of raw material and packing material required for manufacturing the alleged quantity of final product clandestinely removed form factory; (iii) freight payment for any such movement; (iv) unauthorized payment for procuring unaccounted raw material and packing material ; (v) disproportionate power consumption, capacity utilization and labour employment; and (vi) recovery of unaccounted sales proceeds in substantial cash from factory or office premises or anywhere else in direct control of assessee, backed by any confirmation, oral or written, from a person giving such cash against goods removed in clandestine manner without payment of duty from the factory. 18. The said principles stand followed by the Tribunal in number of cases. Reference can be made to M/s.S.R. Ingots Pvt.Ltd. v. Commissioner of Central Excise (CESTAT), New Delhi Final Order No.50750-50751/2018 dated 23 February 2018, Commissioner vs. Kurle Pan Products Pvt.Ltd., Final Order dated 17 January 2019 reported as MANU/CM/0013/2019. In fact, the list is unending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o consideration the entire precedent decisions, the Hon ble High Court observed that there is no abatement made by the department to substantiate the allegation of manufacture of Air-conditioners inasmuch as no evidence has been produced to show that the basic raw material required for manufacturing was procured by the appellant. The ratio of the said decision of the Hon ble High Court is fully applicable to the facts of the present case. 19. In the present case, as already observed the Revenue s entire case is based upon statements which in turn are as regards explanation of various entries in the records maintained by such deponent. In case of clandestine removal, the goods are first required to be manufactured for which purpose a manufacturer needs lot of raw materials. There is no evidence of procurement of excess raw materials. Admittedly the manufacture of Zarda requires a number of raw materials, the main being raw Zarda. Apart from that Glycerin and other chemicals like Benzyl Burate, Methyl Phenyl Acetate compounds, fragrances and packing materials in dibbies. Apart from alleging the procurement of excess raw tobacco, M/s.Niranjan Tobacco Company, which is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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