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TMI Blog2019 (10) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... average consumption of Printed laminated, a packing material arrived on the basis of disputed trial run, it cannot be alleged that the Appellant has manufactured PMGs and the same in turn were removed clandestinely. Only on the basis of alleged average consumption of PLR, the charge of clandestine removal cannot be made. Only from PLR, PMG cannot be produced, it is a mere packing material. The show cause notice has not shown any unaccounted receipt or excess consumption of main raw materials i.e. Supari, Tobacco, Katha, kimam, perfume, menthol which are main raw materials for manufacture of PMG. The packing material would come into picture, only once raw material is consumed and the finished goods are produced - thus, on the basis of receipt of PLR (packing material) or trial run which is also even disputed, it cannot be concluded that the Appellant has manufactured unaccounted PMG and cleared the same without payment of duty. Cross-examination - the adjudicating authority has held that the cross examination should not have been allowed - HELD THAT:- The grant of cross examination is valuable right of the assessee and request for same cannot be brushed aside by merely denyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In one of his statement 28.11.94, he stated that the goods were received from Appellant Unit, Baroda and in next statement he stated that the goods were received from Pune Unit. Thus the statements of Shri Zabak were contradictory and without investigation and corroboration, it cannot be said that the Appellant had cleared the seized goods. Further Shri Zabak also retracted his statement. In such case, there are no reason to sustain the confiscation of seized goods. The demands, penalties and confiscation ordered by the adjudicating authority is not sustainable - appeal allowed - decided in favor of appellant. - E/1406, 1358-1365, 1371/2011-DB - A/11918-11928/2019 - Dated:- 15-10-2019 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Sh. Mayur Shroff, Advocate for the Appellant Sh. L. Patra., Assistant Commr. (AR) for the Respondent ORDER The present appeals have been filed, against Order-in-Original dt. 07.09.2011 passed by the Commissioner of Customs Central Excise, Vadodara I, by M/s Dhariwal Industries Ltd. (M/s DIL), Shri Ajit Baburao Jain, CEO of M/s DIL, Shri A.U.Patil Factory M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 784 boxes (61,59,136 pouches) of 2 gms and 871.2 boxes (21,78,000 pouches) of 4 gms. The Appellant has recorded production of 6019 Boxes of 2 gms PMG and 562 Boxes of 4 gms PMG in RG 1 Register. 4,95,000 pouches of 2 gms were seized during the search on 13/14.08.94. Thus the remaining production of PMG which was not recorded by the Appellant was removed clandestinely without payment of central excise duty. It was also alleged that after considering the receipt, stock and consumption of inner printed carton, there appears to be shortage of 1,85,370 Nos. of 100 gms and 9,750 Nos. of 200 gms inner printed cartoon during the impugned period i.e 01/94 to 13/14.08.94. 1.4 It was further alleged that purchase invoices and purchase order seized from Baroda factory shows that M/s DIL has received 31 consignments of inner printed cartoon from various suppliers such as Deek Printers, Ahmedabad, M/s Deek Printers Pvt. Ltd, Ahmedabad and M/s Gaurang Thakore Co., Ahmedabad, but receipt of only 19 consignments was shown in RG23A Part I register. On the basis of LRs/ register of transporter M/s Bagai Golden Transport/ Sarco Roadlines and Sudhir Roadlines, it was alleged that Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.6 The proposals made in the show cause notice regarding duty demand, penalties and confiscation of goods were confirmed vide adjudication order dt 13.05.99. Also the show cause notice issued to Shirur unit on same grounds was also decided wherein the adjudicating authority had dropped the part demands. 1.7 Aggrieved the Appellants in both the case filed appeal before Tribunal. The revenue also filed appeal against the part dropping of demand in case of Shirur unit. Vide common order dt. 28.05.2004, the Tribunal set aside the demands on unaccounted production in case of both the units. In respect of demand of Modvat credit and violations and confiscation of Pan Masala and PLR seized and penalty on confiscated goods, the case was remanded back to the adjudication authority. The department appeal in respect of Shirur Unit was dismissed. Vide Order dt. 07.06.2005 the matter was readjudicated and a demand of ₹ 10,32,640.92 and ₹ 5,43,750/- was confirmed against the Appellant alongwith fine and penalty. The seized goods were also ordered for confiscation. Meanwhile against the Order dt. 28.05.2004 of the Tribunal, the revenue filed appeal challenging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cross examinations of employees of the Appellant concern and officers who visited the factory. Shri V.H. Shimpi, Storekeeper during his cross examination stated that he was not present during the trial run and was physically and mentally tortured by the officers to write whatever was asked to him by the officers. He also stated that he was not even aware as to who was taking the trial run and was not aware of any of the details of trial run. There are contradictions in version of departmental officers given during cross examination which establish that the trial run was patently unreliable and the ratio arrived at was hypothetical. In his cross examination Shri R. V. Borkar, Superintendent stated that PLR was counted numerically and not by weight whereas Shri. Brahmbhat has stated that the PLR was actually weighed at the time of trial run. It is also significant that the version of the departmental officers regarding the stock of raw materials like Supari, Katha, lime, tobacco etc. also differ. While Shri R. V. Borkar has stated that raw materials like Supari, katha, lime, tobacco etc were available in the factory and officers had counted the physical stock of each items while Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertained by weighing empty pouches also. The finding that the weight of pouch may vary only in 1/100th of 1/1000th gms is mere ipse dixit without any technical basis. Infact there are wide variation in the figures (0.38 at Shirur for 2 gm pouch and 0.46 at Vadodara for the same 2 gm pouch) makes it manifest that the variation of the results of the trial run was not 1/100th or 1/100th gms but to the extent of 31% - (0.12/0.38 x 100) which establishes the unreliability of trial run. 2.2 The Ld. Adjudicating authority in his findings has held that the cross examination should not have been allowed which is contrary to the tenants of natural justice and the impugned order deserves to be set aside on this ground alone. The findings are contrary to the provisions of Section 9D of the Central Excise Act. He relies upon judgments in case of Arya Abhushan Bhandar 2002 (143) ELT 25 (SC), Swadeshi Polytech 2000 (122) ELT 641 (SC), Jindal Drugs Pvt. Ltd. 2016 (340) ELT 67 (P H). 2.3 He submits that the adjudicating authority has relied upon statements recorded by the officers of Chairman Shri R.M. Dhariwal, Manager Shri A.U. Patil, Storekeepr Shri V.H. Shimpi. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se it cannot be said that the credit was availed wrongly. It is only a technical breach. 2.5 In respect of confiscation of Pan Masala Gutka pouches and raw material/ packing material valued at ₹ 29,29,368/-, he submits that all the seized goods are packing material and menthol except 2 gms PMG worth ₹ 3,59,865/-. There is no basis for confiscation of raw material and packing material which are not finished goods. As far as finished goods PMG is concerned, the same were lying in loose condition (in strip form) and were to undergo the process of packing in the inner printed cartons and further packing in corrugated boxes. The loose strip has not reached the RG 1 stage and there was no basis for seizure of the same. He relies upon judgments in case of Anchal Prints Pvt. Ltd. 2009 (235) ELT 117 (TRI), Mohit Rollers P. Ltd. 2018 (9) GSTL 389. 2.6 In respect of demand of ₹ 5,43,750/- he submits that the demand has been made on the basis of transporters record and the Appellant have not been named as consignor in those records. Not a single document has been found from their factory and hence in absence of any corroborative evidence, no demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the production accounted for and the difference between the two is alleged to have been removed clandestinely. We find that the Appellant has challenged the trial run on the ground that the same was conducted arbitrarily and wrongly by the officers. Further the statements were retracted by way of affidavit and cross examinations. We find that during investigation the persons whose statements were recorded had retracted their statements. During cross examination the employees and the director Shri R.M. Dhariwal has stated that the statements were recorded under threat, coercion and duress. In such case we find that only on the basis of statements and trial run to ascertain the consumption of PLR, demand cannot be made. We find that on the basis of average consumption of Printed laminated, a packing material arrived on the basis of disputed trial run, it cannot be alleged that the Appellant has manufactured PMGs and the same in turn were removed clandestinely. Only on the basis of alleged average consumption of PLR, the charge of clandestine removal cannot be made. As pointed out by the Ld. Counsel, we find that only from PLR, PMG cannot be produced, it is a mere packing material. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of demand on the basis of consumption of PLR held as under : 14 . After hearing rival submission, perusal of the records and the case laws relied on by both the sides, we find that the demand of the department is based only on theoretical calculation of PLR which is not the main input of the appellants. The main product of appellant is Star Gutkha and as mentioned in the preceding paragraphs for preparation of Gutkha the main raw materials such as Supari, Katha, Tobacco, Menthol, Cardamom, lime etc. are needed. As contended by the ld. Consultant of the appellant, the wastage was claimed around 22% as against 14.69% allowed by the department. Though there is no statutory permissible limit fixed under the law, however, the ld. Consultant has contended that as per the trade practice the wastage of 22% is easily allowed in the manufacture of Pan Masala which is neither unreasonable nor illogical. The practice itself has assumed the force of law by its usage in the trade for a long time and as such we do not find any justification on the part of the department not to have allowed wastage of 22%. Besides, we find that when the department has based his case on the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ambica Metal Works - ECR Vol. 29 page 549 Evasion of duty must be based on solid and acceptable evidence (v) D.S. Screen Pvt. Ltd. - 1990 (50) E.L.T. 475 (Tri.) In the absence of any corroborative of circumstantial evidence fraudulent removal not inferable. (vi) V.K. Thampy - 1994 (69) E.L.T. 300 Investigation not done to ascertain whether the parameters like electricity consumed - Raw materials used. (vii) K. Harinath Gupta - 1994 (71) E.L.T. 980 Clandestine removal burden on dept - Sources of raw materials not contacted buyers not contacted - Receipt of sale proceeds not established. (viii) Icy Cold - 1994 (69) E.L.T. 337 Clandestine removal a positive act not provable on mere assumptions and presumptions. (ix) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween various other documents - Gap in power consumption - No sufficient materials for establishing clandestine removal. (xvii) 2000 (117) E.L.T. 659 (T) -RLT 35 p. 654 (T) Pepsico India Holding v. CCE Meerut All other parameters as laid down in Rule 173E should also have been taken into consideration. The legal position as brought out in the cases mentioned above leaves no doubt that the demand cannot be sustained on the ground of presumption. 15 . From the replies to the show cause notice dated 9-10-97, 6-1-97, 2-2-97, 17-2-97 on pages 120 to 211, it is crystal clear that the appellants have submitted specific replies to the points raised by the department and as such it was incumbent on the department to prove their case beyond reasonable doubt. In the absence of any strict, tangible, direct, positive and corroborative evidence, we do not find any justification to sustain the demand raised in this case. We, therefore, set aside the impugned order and allow the appeals filed by the appellants with consequential relief, if any. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants can legitimately claim support from certain other decisions (cited by their Counsel) also. In the case of I.T.C. Ltd. v. CCE, Bangalore [Tribunal s Final Order No. 333/1996-D dated 13-5-1996 [1996 (87) E.L.T. 453 (T)] in Appeal No. E/1318/88-D], it was held that cigarette sample checks undertaken by the Department on 5th, 6th and 8 th September, 1986 were not to be made applicable to past clearances of cigarettes. In the case of Sri Sakthi Textiles (P) Ltd. v. Government of India Others [Madras High Court s order dated 1-4-1972 in W.P. No. 1421/71], it was held that, on the basis of the results of tests on samples of goods, duty could not be levied on the goods manufactured and cleared prior to the period of sampling. The Government themselves had taken the same view in the case of National Textile Corporation [1982 (10) E.L.T. 639 (GOI)], Aggarwal Metal Works [1982 (10) E.L.T. 689 (GOI)] etc. In the case of CCE, Coimbatore v. Cambodia Mills Ltd. [2001 (128) E.L.T. 373 Mad.)], the Hon ble High Court held, in respect of goods manufactured on the date of drawal of sample, that demand of duty based on the test result was sustainable only in respect of the goods manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom their factory. Ultimately the said roll after release was consumed in the manufacture by the Appellant. In that case only on the limited ground that the PLR was found at godown of Appellant, the duty demand cannot be made as the goods were not intended to be removed without payment of duty nor there is any evidence to allege so. 9. As regard confiscation of goods worth ₹ 29,12,368.93, we find that the goods were raw material/ packing material except 2 gms PMG pouches which were lying in factory in strips form. As far as the raw material and packing material is concerned, the same were legally acquired and there is no case for seizure/ confiscation of same. In respect of finished goods, we find that the PNG were in strip form awaiting packing in inner cartoon and then corrugated boxes. Even the show cause notice accepts the fact that the PMG Pouches were packed in inner printed cartoon and then into corrugated boxes. This clearly means that the goods did not reached to RG-1 Stage of accounting. We thus do not find any reason to seize/ confiscate the goods when the goods did not reach RG-1 Stage nor there was any preparation on part of assessee to remove the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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