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TMI Blog2022 (8) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... rder also directed for adjustment of the amount of Rs.30,00,000/- recovered from the Company during the course of investigations against the aforesaid demands and confirmed the imposition of personal penalties against Sri Sanjay Gadodia (Director of the Company), Sri Sanjib Mahapatra (Authorised Representative of the Company) and Sri Praharaj Swain (Despatch clerk of the Company). 2. Briefly stated, the facts of the case are as follows:- i. On November 3, 2008 a search and seizure operation was conducted by a team of Central Excise Officers at the Company's factory premises at Kumjharia, Bijabahal, District - Sundergarh, Odisha. During the course of the said search proceeding which continued uptil November 5, 2008, the records pertaining to the Company's production and clearances were examined, joint stock verification was conducted under Panchnamaand the statements of various personnel of the Company were also recorded. The Central Excise Officers detected huge shortage in stock of finished goods as compared to the stock recorded in the Company's Daily Stock Account register, which had purportedly been removed in a clandestine manner without payment of duty. Subsequently, amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act read with Section 100 of the Code of Criminal Procedure, 1973. Section 100(4) of the Code of Criminal Procedure, 1973 laid down that search shall be made in the presence of two or more independent and respectable inhabitants of the locality in which the place to be searched is situated or of any other locality, if no such inhabitant of the said locality is available or is not willing to be a witness. In the present case, the two panchas were residents of Nagabazar, Rourkela and not of the locality of Kumjharia, Bijabahal where the Company's factory premises is situated. Nagabazar, Rourlela is located more than 44 km away from Kumjharia, Bijabahal and only 'interested' witnesses would have travelled to and fro Nagabazar, Rourkela for three consecutive days. Moreover, the 'Full address' column in the Panchnama had been filled up with incomplete details, all of which cast a doubt upon the very legality of the Panchnama proceeding. In any case, since the Panchnama in question was a typed document, it ought to have borne a declaration that the contents thereof were in tune with what the panchas had seen, which was missing. A Panchnama drawn in contravention of the mandatory le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g report of M. S. Rods that physical stock taking had continued till "17.00 Hrs of 05.11.2008", whereas it had been noted in the Panchnama that the process of stock verification and seizure had been completed at "22.00 hrs on 5.11.2008"; (c) Physical weighment of nearly 650 MT materials had been completed within 6-7 hours' time on November 5, 2008 which was totally impossible. (d) Without details of the physical stock taking process on record, it could not have been assumed that the purported stock verification had been carried out lawfully and scientifically. The Department had itself treated the records of physical stock taking and weighment details as non-relied upon documents. In fact, despite repeated requests by the Company, the Commissioner had failed to ensure that the said stock taking records and other details were provided to it. IV. The purported incriminating statements given by Sri Sanjay Godadia, Sri Sanjib Mahapatra and Sri Praharaj Swain aforesaid had been duly retracted and the said purported statements could not have been treated as admissible evidence. The said purported statements had been obtained by the Department under threat and coercion, when the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular transporters or major buyers and, surprisingly, no statement had been taken from Sri Sanjay Pandia, Company's staff who used to look after the loading and weighment of vehicles inside the factory or from Sri Prem Kumar Jha, Company's staff who was the overall incharge and supervised loading after 8.00 p.m. In such circumstances, mere incriminating statements and shortage of finished goods determined on the basis of unreliable stock verification were highly insufficient to sustain the impugned demands. In this regard, reliance was placed on the following decisions: (i) Commissioner v. Anand Founders and Engineers, reported in 2016 (331) ELT 340 (P&H); (ii) Commr. Of C. Ex, Haldia v. Shri Badrinarayan Alloys & Steel Ltd., reported in 2018 (8) GSTL 79 (T); (iii) Jai Balaji Industries Ltd. v. Commr., reported in 2021 (378) ELT 674 (T); (iv) Commr. of C. Ex. V. Nissan Thermoware P. Ltd., reported in 2011 (266) ELT 45 (Guj.); (v) Raj Ratan Industries Ltd. v. Commissioner, reported in 2013 (289) ELT 482 (T); (vi) ShivalayaIspat& Power v. Commissioner, reported in 2017 (357) ELT 742 (T); (vii) Super Smelters Ltd. v. Commissioner of Customs, Central Excise & Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative's written submission that reference to "the weighment was started from 1730 hrs. on 03.11.2008 in the weighbridge of the factory by putting few MS rods batch by batch and weighment slips issued by the weighbridge were kept" should be understood as reference to the initiation of weighment procedure, does not appeal us. The absence of detailed description as regards the weighment of M. S. Angles, M. S. Ingots and M. S. Scrap in the Panchnama, although mentioned in the joint stock verification reports, does cast serious doubt upon the reliability and correctness of an otherwise valid Panchnama. It appears that the Commissioner had mistakenly proceeded on the assumption that "A Panchnama has been drawn enumerating the entire event...." Having gone through the show cause notice dated October 8, 2009 and the impugned adjudication order, we also find that the records of stock taking, weighment slips etc. have been treated as non-relied upon documents by the revenue, which is rather astonishing. In several decisions rendered by the Tribunal, as discussed in detailed in the subsequent paragraphs, it has been consistently held that stock taking has to be conducted in a proper m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finished goods in question had been malfunctioning, as declared by the Senior Inspector, Legal Metrology, Panposh vide his report dated November 1, 2008 appearing at pages 176A to 176C of the appeal Paper Book. Probably, owing to usage of a faulty Weigh Bridge, weighment of general Scrap during physical stock taking had exactly tallied with the stock recorded in the Company's Daily Stock Account. We find it rather difficult to believe that such physical weighment of general Scrap at any given point of time would have matched in toto with the Company's stock book. Even if the arguments of the Authorized Representative were to be accepted that the aforesaid report by the Senior Inspector, Orisha Legal Meteorology Department, had not been produced before the department at any point of time and the company should not be permitted to adduce any additional evidence before us, then also we would not have come to a different conclusion as to the accuracy and reliability of the stock verification of the goods.We also find that, according to the joint stock verification reports, nearly 650 MTs of materials had been physically weighed between 9.30 a.m. and 5.00 p.m. on November 5, 2008. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein that mere shortages detected at the time of visit of the Central Excise officers cannot ipso facto lead to the allegations and findings of clandestine removal. In Shree Badrinarayan Alloys & Steels Ltd., supra, a show cause notice alleging clandestine removal had been issued to the assessee based on physical shortage detected through stock verification conducted by the Central Excise officers at the assessee's factory premises. By the adjudication order, duty to the tune of Rs.80,323/- with interest and equivalent penalty had been confirmed while demand of duty as regards the goods found short in stock had been dropped, which part was appealed against by the Department before the Tribunal. The said appeal was dismissed by the Tribunal by holding, inter alia, as under :- ".... 7. On perusal of the grounds of appeal, I find that the Revenue had neither disclosed any material nor described the method of stock taking to counter the case. The only contention is that the small quantity was lying in the factory premises and therefore, the weighment was done easily. I am unable to accept the contention of the Revenue without any basis, such as, the details of the weighment etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturing and removal of excisable goods is to be proved by tangible, direct affirmative and incontrovertible evidence relating to receipts of raw materials inside the factory premises, and non-accountal thereof in the statutory records, utilization of such raw materials for clandestine manufacture of finished goods, manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, amount received by the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal. All these material evidence are missing in the present case and the evidences brought into the record by the department are incomplete, inconsistent and not a reliable piece of evidence to prove charges of clandestine removal. 20. The shortage which was detected by the officers is based on average weight method basis and, therefore, mere admission by the Directors, who deposited the duty for the shortage, is not enough to proof that the goods were clandestinely cleared from the appellant factory. We have also considered the judgment cited by the appellant in case of C. C. Ex., Lucknow v. M/s. Sigma Castin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra aforesaid had been retracted by way of affidavit dated January 25, 2009. Similarly, the purported statements given by Sri Praharaj Swain and Sri Sanjay Gadodia had been retracted by way of affidavits. However, the said affidavits could not be produced before the adjudicating authority by the co-appellants/noticees. Nevertheless, the adjudicating authority had proceeded with the matter as if the aforesaid affidavits had been furnished before him. In our view, the Commissioner had erred by holding that the retractions were belated, did not inspire confidence of bona fides and that the claim of retraction was after-thought under legal advice. The Commissioner had also erred by relying upon a host of judicial decisions without discussing their individual factual situations, as is apparent from a bare perusal of paragraph no. 8.4 at pages 15-17 of the impugned order, and the said findings in this behalf are liable to be held as untenable. On a query from this Bench, the Ld.Advocate submitted that necessary averments as to the retraction of the aforesaid purported statements had been made in the replies to the show cause notices and other communications of the appellants/noticees. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained in the statement made during the course of enquiry/investigations before a Gazetted Central Excise officer, has to be proved by evidence other than the statement itself. Consequently, any reliance on the statement recorded during investigations would stand vitiated in law, in absence of the circumstances specified in Section 9D(1) of the Act. A statement which does not suffer from the handicaps contemplated by clause (a) of the aforesaid Section 9D(1), must be admitted in evidence only in accordance with the procedure prescribed under clause (b) of Section 9D(1) of the Act. The said propositions are duly supported by the decision of the Hon'ble Punjab and Haryana High Court in the case of Jindal Drugs Pvt. Ltd., supra, cited by the appellants. To the same effect is the decision of the Hon'ble Chhattisgarh High Court in the case of Hi Tech Abrasives Ltd., supra, cited by the appellants. Accordingly, we hold that the adjudicating authority could not have straightaway relied on the purported incriminating statements of Sri Sanjib Mahapatra, Sri Prahraj Swain and Sri Sanjay Gadodia aforesaid (assuming that the subsequent retractions were invalid) without legitimately invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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