9911796707
TMI Blog2020 (12) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the company by the learned counsel for the official liquidator before us. 2. The appellant/assessee was a manufacturer of Alkyd, Phenolic and Malleic Resins (herein after referred to as "resins") falling under Chapter heading 3907.50/3909.51 of the First Schedule to the Central Excise Tariff Act, 1985. Shri Sama Rajasekhar was the Managing Director of the appellant/assessee and is the appellant in the appeal E/387/2012. Officers of DRI conducted searches and seizures, investigated and came to the conclusion that the appellant was clearing resins in excess quantity which were being booked for transportation under fictitious bills issued in the name of M/s Kalyan Chemicals, M/s Prasad Chemicals and M/s Priya Chemicals. It was further found that the goods in such invoices were declared as Orthoxylene, MTO, Xylene, etc. During searches they found 10 barrels of chemicals at the premises of the transporter M/s SRMT Ltd issued under the cover of two bills of M/s Kalyan Chemicals, Vijayawada and the goods therein were declared as orthoxylene. Further investigation by the officers showed that the goods were indeed the resins manufactured by the appellant/assessee and we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 30.12.2003 V. Veera Raghavan, Proprietor, M/s Vee Kay Jay Paints & Chemicals, Chennai 13. 21.10.2003 R. Radhakrishnan, Proprietor, M/s Star Paints, Tondiarpet, Chennai 14. 03.08.2004 R. Karthick (alias) R. Daniel Karthick, Proprietor, M/s Raja Colour Tech and formerly Proprietor of M/s Raja Paints, Old Washermanpet, Chennai 15. 14.07.2005 25.08.2005 Smt S. Shanti, W/o Late Sri P. Sekhar, Proprietrix of M/s Vivek Paints, Muthugounderpalayam, Erode 16. 18.07.2005 T. Kalyanasundaram, Managing Director, M/s Veena Paints Pvt Ltd, Solaialagupuram Street, Madurai 17. 29.08.2005 K. Nagaraj, Partner, M/s Nirma Paints & Chemicals, Bellary 18. 10.07.2005 Sri Rajesh Mehta, Partner of M/s Oilchem India, Indore 5. Of the above, cross examination of S.No.1, 3, 8, 11, 15 & 18 could not be completed. S.No.11 above had died and therefore, could not be cross examined, while, S.No.15 has expressed her inability to come because of her severe lower back pain. Thus only 12 of the 18 witnesses could be cross examined. 6. As far as the relied upon documents are concerned, it is the case of the revenue that all relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to attend, either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required : Provided that the exemptions under Sections 132 and 133 of the Code of Civil Procedure, 1908 (5 of 1908) shall be applicable to requisitions for attendance under this section. (3) Every such inquiry as aforesaid shall be deemed to be a "judicial proceeding" within the meaning of Section 193 and Section 228 of the Indian Penal Code, 1860 (45 of 1860). Section 9D. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a Gazette rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, so that the Revenue would examine them in chief before the adjudicating authority, i.e. before Respondent No 2. (ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e. to Ambika and Jay Ambey in this case. (iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examined in chief before the adjudicating authority, i.e. before Respondent No 2, would have to be eschewed from evidence, and it would not be permissible for Respondent No 2 to rely on the said evidence while adjudicating the matter. Neither, needless to say, would be open to the Revenue to rely on the said statements to support the case sought to be made out in the Show Cause Notice. (iv) Once examination-in-chief, of the makers of the statements, on whom the Revenue seeks to rely in adjudication proceedings, takes place, and a copy thereof is made available to the assessee, it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, should it choose to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the cross examination although there was no specific retraction by him before the cross examination. (d) Private books of accounts maintained by the employees of the appellant contained references to the consignment notes, quantities and actual quality/grade of the goods and the realisation actually done. In some cases, the books contained entries other than those transported by the above two transporters viz., M/s SRMT and M/s Inter City Cargo Movers. These entries were explained by the authors of the books in their statements under section 14 of the Central Excise Act. The two authors who made the entries were Shri V. Srinivas Mahesh, Marketing Representative of the appellant and Shri V.B.S. Durga Prasad, Sales Executive of the appellant. Shri Srinivas Mahesh was not cross examined. Shri Durga Prasad reaffirmed his original statement during the cross examination. (e) Corroborative evidence taken in the form of statements by the buyers as follows: i. Statement dt.18.07.2005 of Shri T. Kalyana Sundaram, Managing Director of M/s Veena Paints, Madurai. ii. Statements dt.21.10.2003 and 31.12.2003 of Shri V. Veera Raghavan, Proprietor of M/s Vee Kay Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MT booked in the name of M/s Kalyan Chemicals and which were described as orthoxylene which on testing proved to be resin. These barrels are not related to them. All documents showed that they pertain to M/s Kalyan Chemicals. Therefore, clearance of these barrels cannot be attributed to them. 13. He would argue that although the seizure was with respect to these barrels, the case was made out to be much larger and this case was built on the basis of statements of 18 persons and several relied upon documents. Of the 18 persons, 6 were not examined/cross examined by the adjudicating authority even during the denovo proceedings and hence their statements cannot be relied upon. As far as the remaining 12 are concerned, the alleged buyers of the goods, whose statements were relied upon, have negated their statements during the cross examination and affirmed that they only purchased resin from the assessee/appellant under the cover of proper documents and made payments accordingly. Thus, their statements do not support the contention of the department that goods were cleared in the name of M/s Kalyan Chemicals, M/s Prasad Chemicals etc., describing the goods as orthoxylene, xylene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of M/s Prasad Chemicals on instructions of Shri S. Rajasekhar within the factory of the assessee only. The firm was run in his name from the same premises as the assessee and it does not have any independent business. Only documents are signed in the name of Prasad Chemicals. Similarly, Shri Kalyana Chakravarthy, another employee of the assessee has confirmed that Kalyan Chemicals was a unit opened in his name and he was actually only an employee of the assessee and only papers are drawn in the name of M/s Kalyan Chemicals. Both Shri Kalyana Chakravarthy and Shri V.B.S. Durga Prasad have affirmed their statements during the cross examination. Learned counsel would submit that these statements, per se, would not be sufficient to assert that M/s Kalyan Chemicals and M/s Prasad Chemicals are fictitious firms created as front for assessee. He would submit that separate VAT registrations have been obtained for each of these companies and have been filing returns also. v. The statements of the buyers taken by the revenue as evidence are no longer relevant because of the buyers who have been cross examined have negated their statements made before the officers. vi. As f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 16. Statements were also records from other transporters such as Shri S.S. Abrar of M/s Inter City Cargo Movers. Statements of the buyers of the chemicals who were mainly the paint manufacturers were also recorded. None of these people have retracted their statements. The buyers as well as Shri S.S. Abrar have negated their statements during the cross examination which was conducted after several years. The learned adjudicating authority has correctly held that such negation during cross examination without having retracted their statements made several years ago cannot be accepted and their original statements must be relied upon. Therefore, it must be held that appellant has cleared goods clandestinely in the name of three dummy firms. 17. He would further submit that not only has the clearance of goods been established but the flow back of money has also been established by producing evidence of cash deposits and DDs being made in the favour of the assessee. In view of the above, he would submit that the case is fully established and the impugned order is correct and balanced and needs to be upheld and the appeals may be rejected. 18. We have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion/ cross examination of the person making the statement under section 9D. If the statement has been negated during such cross examination, the evidentiary value of such statement is in doubt. Similarly, the statement of Shri S.S. Abrar, Proprietor of M/s Inter City Cargo Movers also has been negated by him during the cross examination. Thus, the evidence, as far as the transportation of the goods alleged to be clandestinely manufactured and removed as well as their sale to the prospective buyers has not been established to a reasonable degree of certainty in this case. As far as the manufacture and clearance are concerned, the alleged owners of M/s Kalyan Chemicals and M/s Prasad Chemicals have confirmed that they have set up dummy units at the behest of Shri Sama Rajasekhar, Managing Director of the assessee only to make paper entries. They have affirmed this position during the cross examination by the assessee's advocate. The assessee's advocate could not establish during the cross examination that their statements were false. 20. As far as the flow back of cash is concerned, we find that there is some evidence of the accounts being opened and cash being deposited and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (P. VENKATA SUBBA RAO) MEMBER (TECHNICAL) ANIL CHOUDHARY: I have the benefit of going through the order recorded by learned brother Shri P. V. Subba Rao, Member (Technical) but I am unable to agree with the same. I hereby record my separate order as follows:- Revenue had intelligence of evasion of duty by the appellant company and accordingly parallel search was organised in the premises of the appellant and also in the premises of some of the suppliers as well as buyers of finished goods, as well as transporters. Search was also conducted at the residential premises of employees / sales agent. From all these places incriminating documents were seized and the concerned persons admitted to the removal of excisable goods clandestinely by the appellant, which is morefully discussed in the following paragraphs. 25. The Managing Director - Shri S. Rajsekhar of M/s Harika on being confronted with the documents and statements of other connected person(s), admitted clandestine removal in his statement recorded on 22.10.2003 and also on other dates. He categorically admitted that he was clearing part of his finished goods in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot know any details, etc. Further, purchase invoices in the name of M/s Kalyan Chemicals were also arranged by Shri S. Rajsekhar. He also stated that he has done all these activities on the instruction of his employer - Shri S. Rajsekhar to save his job, without any other consideration. 26. Shri Kalyan Chakraworty was cross examined on 08.12.2010, and he stood by his earlier statement given during investigation. He also filed written submission being reply to the show cause notice, wherein he also reiterated the facts as aforementioned and affirmed his statement. 27. Further, ten barrels of goods described as orthozylene were seized by the Revenue from the godown of transporter - SRMT at Chennai, consignor - M/s Kalyan Chemicals. On the test being done of the samples drawn, the goods were found to be 'resin' and not 'orthozylene'. M/s Kalyan Chemicals has not purchased resin nor have the manufacturing facility to manufacture resin. Thus, evidently the ten barrels of resin were despatched clandestinely by M/s HRPL, in the name of M/s Kalyan Chemicals misdeclared as orthozylene to evade payment of duty. 28. Similarly, appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... micals. He also identified and explained the contents of the 'outward register' maintained by M/s SRMT and identified the pages /entries made by him and other staff. On being queried as to the name of M/s Prasad Chemicals, appearing in the outward register of M/s SRMT (till June, 2001), Shri Durga Prasad explained that prior to giving bills of M/s Kalyan Chemicals, M/s HRPL use to give the bills under the name of M/s Prasad Chemicals in the same/ similar manner as in the name of M/s Kalyan Chemicals. He also stated that the address of M/s Prasad Chemicals is indicated as Kabela area, Vijayawada, but the goods were actually loaded and booked for transport at M/s HRPL factory only. The aforementioned facts are further corroborated from letter dated 15.10.2003 written by M/s Kalyan Chemicals on its letterhead to M/s SRMT, with regard to claim for damage of goods suffered during transit. As per the letter, the consignments were booked in the name of M/s Kalyan Chemicals vide LR Nos. 1218202 and 1218203 both dated 04.09.2003 and consigned to parties at Chennai were stated to be paints/ resin and the value of damaged or leaked quantity was required to be settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of business showing particulars of (a) party name/ short name (b) a multi digit Sl. No. followed by (c) an encircled number (d) coded description of goods, (e) quantity in number of barrels and weight per barrel, and (f) rates/ price per kg. On verification, the aforementioned particulars at (a) to (e) were found to match with the details of consignee name, LR No., the quantity in barrels and total weight respectively of the consignment booked for transport from Vijayawada in the name of M/s Kalyan Chemicals also corroborated with record of the transporter. The dates of entry in the diary by and large correlated to the date on which the consignments were booked for transport at Vijayawada (as per the transporter records), or were either of immediately preceding or following dates. While the description and value as per the available transport record of the consignment were those of orthozylene / zylene /MTO etc. having value approximately Rs. 10/- per kg., the particulars denoted at Sl. No. (d) and (f) as mentioned above pertain to the actual description of the goods as resin of different variety as indicated in short or code form, as RML, RMD, etc. having valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the period from January, 2003 to October, 2003. Further, in respect of various consignments/ parties, the datewise detail of payment receipt were also found available in this diary, and the noting 'PAID' was written against the specific consignmentwise entries. This diary contained despatches made both in the name of M/s Kalyan Chemicals as well as M/s HRPL. It was also found that certain despatches by M/s HRPL purportedly as trading despatches, example - vide invoice No. T-364 dated 18.01.2003 showing sale of MTO 950 kg. in five barrels @ 16.70 per ltr., valued Rs. 16,500/- booked to M/s Durga Coating, Bangalore through SRMT vide LR No. 767607. This transaction in the said diary was recorded on dated 18.01.2003 as -Durga Coating LR No. 767607 (5) and RMD @ Rs. 45/-. Similarly other trading invoices of M/s HRPL for purportedly sale of MTO were corelatable to the entries in the diary wherein the actual description and value recorded shows the goods were actually resin. 36. Further, small diaries 'Dolphin', 'Vajawat' ledgers were recovered vide Mahazar Sl. No. 2 and 3 maintained as pocket ledger containing partywise account for the period Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri V. B. Durga Prasad in the course of his duty and also certain notings showing the actual description, quantity and value/ rate of certain consignments, which was on verification, pertained to those cleared under the bills of M/s Kalyan Chemicals. 38. Further, various loose sheet slips including computer printed partywise account - statement of M/s HRPL, letters/ correspondence of M/s HRPL, M/s Priya Chemicals etc. were found and recovered and placed in a file at Sl. No. 5 in the Mahazar. The following documents in the said file were found to be of significance:- (a) Pages 19, 25 to 31, 145, 381 to 385 of the said file Sl. No. 5 consisting of the LRs of SRMT/ ICCM pertaining to consignments booked under the name Kalyan Chemicals to various parties at Chennai, bills No. 1/98 of Kalyan Chemicals (corresponding to the LR dated 04.08.03 of ICCM) and No. 2/11 dated 20.08.03 and a letter on the letterhead of Kalyan Chemicals dated 04.08.03, addressed to Check-post authorities requesting clearance, in the absence of Way-bills. The said letter contained the signature of M. Kalyan, as proprietor of 'Kalyan Chemicals'. The said name and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the amounts reflected in the privately maintained ledger of Sri V. Srinivas Mahesh, the employee of HRPL at Chennai and the amounts as per the 'boss-book' an obvious reference to Sri Sama Rajasekhar, M.D. of HRPL. (e) More importantly, page 299 of the above said file was a printed List of products i.e. Resins manufactured by HRPL (with the printed company name and address). In this sheet, prices were handwritten against many items and in addition notings/ remarks were written as the prices being effective from 1st August, 2002 and also that the rates are including CST. The said handwriting was identical to that appearing in the small slips (showing the actual description and price/ rates), as also the other privately maintained documents including those showing the consignment-wise details of the actual description and values corelatable to the bills of Kalyan Chemicals. It thus appeared that the above documents pertained to and showed the actual sales of Resin by HRPL, (including those made under the bills of Kalyan Chemicals, with mis-declared description), collections made against the same from various parties and other related details, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining handwritten details as follows:- 20.06.2003: Ranga Paints, Chennai, RML (LAV)- 10x 190 kg. @ 49/-; SRMT - Door delivery. Thus, from the matching of the particulars and date, consignee, quantity and transporter's name in the bill and LR with the small slip, it is apparent that the goods supplied were resins (EML-LAV denoting Resonated Medium Linseed Resin with Low Acid Value) at a price of Rs. 49/- per kg., while the corresponding bill was issued showing supply of orthozylene @ Rs. 10/- per kg. 41. Similarly, sheet No. 57 to 62 consist of set of LR of SRMT, Vijayawada and corresponding small handwritten slip confirming supply of Resin @ Rs. 50/- or Rs. 51/- whereas as per the invoice of M/s Kalyan Chemicals and in LR the description was orthozylene @ Rs. 10/- per kg. Sheet No. 53 and 54 of the file consist of photocopy of various cheques received during June and July, 2003 all payable to M. Kalyan Chakraworty. Further, counterfoils of bank deposit slips and demand draft application forms were also found as mentioned in Sl. No. 8 to the Mahazar. 42. The counterfoils of deposit slips found pertaining to deposit of cheque and cash into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale to Shri S. Rajsekhar over phone and raisin was despatched generally by door delivery through SRMT, Vijayawada. That after dispatch of resin Shri S. Rajsekhar used to send the third copy of the LR alongwith a chit and bill of Kalyan Chemicals or Prasad Chemicals or Priya Chemicals. That the chit contained details of the buyers name, description of goods, quantity and actual rate at which the resin was supplied. That the set of documents i.e. LR, chit and bill was received by courier and were handed over by him to the respective buyers, who in turn issued a chit being an acknowledgement of receipt of goods and in these chits also the actual rate, quantity and total value of the goods were indicated. That on due date of payment, he contacted the buyers and collected the amount as per the chit and returned the chit issued by the buyer on receipt of the full value/ amount. He also identified that sheet No. 57 and 66 of the made up file No. 1 recovered from his residence where some of the chits and LRs received from HRPL for resin supplied through SRMT. He further identified sheet No. 30 of the message received by him from HRPL informing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition, Global Trust Bank, Vijayawada furnished the copies of the Account- Statements of the above said accounts alongwith copies of the Account-Opening forms and related documents. The relevant details as per these documents, are as follows: Name S/Shri Account Number Period operated Total amounts deposited Ch. Siva Durga Prasad 29000 - 18190 October, 2001 to March, 2002 Rs. 27.54 lakhs (excl. Transfers) V. Durga Prasad 29011 -01075 July, 2002 to May, 2003 Rs. 62.64 lakhs M. Kalyana Chakravarthy 29011- 01142 March, 2003 to October, 2003 Rs. 1.1 crores approx. M. Kalyana Chakravarthy 29011-01248 October, 2003 to November, 2003 For the above accounts, the introduction for the account opening in the name of V. Durga Prasad was given by Ch. S. Durga Prasad (who held the account operated in the immediately preceding period), while in respect of Shri M. Kalyan Chakraworty account, the introduction was given by Sri V. Durga Prasad. The telephone numbers given (namely 414124) in the Account-Opening forms for accounts in the names of S/Sri Ch. Siva Durga Prasad and V. Durga Prasad was the factory-telephone number of HRPL.&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a corner of the plot which was used by the Watchman who stayed there and rared cattle. He also identified and admitted the rent receipts of M/s Kalyan Chemicals as issued by him. He also affirmed that all the letters in the name of M/s Kalyan Chemicals were delivered at HRPL factory (located nearby). 47. Thus, it is evident that M/s Prasad Chemicals and M/s Kalyan Chemicals were created and registered with the Sales Tax Authority in the name of employees of HRPL to clandestinely purchase raw materials for HRPL and also clandestine clearance of the finished goods of HRPL for the purpose of evading Central Excise duty and other taxes. Further, bank accounts were opened in the name of the said employees namely Shri M. Kalyan Chakraworty, V. B. Durga Prasad, C. S. Durga Prasad etc. to facilitate the receipt of flow back of money for the clandestinely cleared finished products. The transaction of large amounts reflected in these bank accounts, hereinabove mentioned, is abnormal and unexplained in respect of status of these individuals who are the employees of M/s HRPL at meagre salary. Further, these employees in their statements have admitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not know the manner of disposal of the purchases. Further, he categorically stated that he has done all activities in the name of M/s Kalyan Chemicals on the instruction of Shri S. Rajsekhar, being the employee and have not received any additional consideration for the same. 49. Shri V. B. Durga Prasad, Sales Executive of M/s HRPL in his statement dated 09.08.2004 deposed, that in connection with his duty he used to visit Chennai and other places frequently for procuring orders and collection of payment from the customers. That the amount(s) collected were deposited in the account of M/s HRPL and also in the account of Shri M. Kalyan Chakraworty in Global Trust Bank, and sometimes the customer deposited the payments directly in the accounts as per the instructions of Shri S. Rajsekhar. He used to note down the details of despatches of resin and collection of payment. He had taken a room on rent in Shivkasi Nadar Mansion, Chennai for his stay. He also identified the Executive Diary -2003 recovered from his room at Chennai, containing the datewise details of despatch of resin from M/s HRPL for the period January, 2003 to 17.10.2003. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k cheques and everything at the instance of Shri S. Rajsekhar. He has no personal interest in M/s Prasad Chemicals or in the bank account No. 29000 -18190 opened in Global Trust Bank, Vijayawada. He further affirmed that the said account was used for depositing the unaccounted amounts (flow back) from the sale of resin removed clandestinely by M/s HRPL under the invoices of M/s Prasad Chemicals or M/s Kalyan Chemicals. He also stated that he has not received any additional consideration in this matter. 51. In the course of enquiry made with M/s Oilchem India, they admitted that they have supplied raw materials to M/s HRPL as well as M/s Prasad Chemicals on receipt of payment by way of demand draft. 52. Further, the clandestine purchase of raw materials by M/s HRPL, is also established from several payments made from the aforementioned bank accounts of Shri V. B. Durga Prasad and Shri M. Kalyan Chakraworty during the year 2002-2003 in the name of Shri K. Rajeswar Rao and Shri K. Rajnikant. These payments aggregate to about Rs. 32 lakhs which were mainly credited in the name of these two persons in their bank account held with Global Trust Bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions recorded in the resumed private records vide Mahazar from V. S. Mahesh and V. B. Durga Prasad. 54. Similar confirmation was made by other buyers of clandestinely removed goods namely - M/s Sujatha Paints, Chennai through its Partner Shri M. Mohan, by M/s Vee Kay Jay Paints & Chemicals, Chennai through its prop. V. Veeraraghavan, M/s Star Paints, Chennai through its Prop. Shri R. Radhakrishnan, M/s Raja Paints, Chennai through its Prop. R. Karthikeyan etc. 55. From the aforementioned documentary facts which were revealed in the course of investigation and enquiry, I find that the statements of various persons are supported by documentary evidence. Such documentary evidence have been admitted by the concerned employees of M/s HRPL and also admitted by Shri S. Rajsekhar, the Managing Director of M/s HRPL. Both clandestine purchases of raw materials, clandestine removal of finished goods, evidence of transport, flow back of sale proceeds of the clandestinely removed goods have been established. I further hold that retraction of the statements by some of the persons at the later stage as well as non appearance of some of the witness in the adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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