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TMI Blog2024 (7) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that since Smt. Chunia Nandi is one of the Directors of VSPL and also the Proprietor of DCPWB, Shri D. Nandi has kept these documents in the premises of DCPWB and he has control over these documents. The ld. adjudicating authority cited the provisions of Section 36A of the Central Excise Act, 1944 and observed that these documents can be admitted as evidence and duty can be demanded based on the entries available in these documents. A perusal of the provisions of Section 36A reveals that the documents seized from another premises can be admitted as evidence provided the author of the entries made in the documents has been identified. Once the identity of the person in whose handwriting the documents are written is established and his statement is taken admitting that it is his handwriting, then the documents can be admitted as evidence - the requirements as provided under Section 36A are not fulfilled in this case and hence the seized documents cannot be presumed to be documents relating to the appellant company and relied upon to demand Central Excise Duty from the appellant-company. In the case of METAL FITTING (P) LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, DELHI [ 1997 (4) TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 9D - it is observed that the procedure set out under Section 9D is a mandatory procedure and without following this procedure, no reliance can be placed on any statement recorded under Section 14 of the Central Excise Act, 1944. The allegation of clandestine clearance cannot be sustained on the basis of statements alone. There must be some positive evidences like purchase and consumption of unaccounted raw materials, discrepancy between recorded stock and physical stock, seizure of any goods en route, consumption of excess electricity, actual clandestine removal of finished goods without payment of duty, mode of removal, evidence of transporters and buyers of the clandestinely removed goods and flow back of funds pertaining to clandestine removals - the demands confirmed on account of clandestine removal in the impugned order without any of the above mentioned evidences are not sustainable. Since the demands of duty on account of clandestine removal and undervaluation is not sustained and set aside, the question of demanding interest and imposing penalty on the appellant company does not arise. Penalty imposed on Appellant No. 2, the Managing Director, Shri Digambar N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Deepak Computer Public Weigh Bridge (hereinafter referred to as DCPWB ) at Jagatpur, Cuttack (Odisha) and transport office of M/s. Hanuman Road Carrier (hereinafter referred to as HRC ) at Bajarangballi Building, Near Manguli Chowk, NH-5, Cuttack (Odisha). DCPWB is a proprietorship concern and does not belong to the appellant-company. 2.1 During the course of search, the Officers seized certain documents from the premises of DCPWB under Panchnama. The seized documents contained: (i) Two small Notebooks; and (ii) Loose documents of 73 numbers of sheets. 2.2. The officers verified the entries available in both the Note books and the loose sheets recovered from the premises of DCPWB and correlated the same with the invoices issued by the appellant company and the Sales Register maintained by them. The correlation, revealed the following:- (a) Each page of the Note Books was for one party like 'BAPL', 'I.P.I. Steel', SREE Chatan (Shree Chaitanya), 'Mahesh Ferro', '7 Hiles' (Seven Hills), 'Prime Steels', etc. (b) Each page (where entries are there) gives a date wise clearance of Sponge Iron with indications of vehicle numbers, quantities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 10 11 of statement of Shri Pradhan and Ref. Q. No. 10 of the statement of Shri Mohanty recorded under Section 14 of the Act have respectively stated that Shri Nandi, as Managing Director, was responsible for procurement of raw materials, valuation of Sponge Iron and Clearance of Sponge Iron from the factory of VSPL. 3.2. Based on the aforesaid seized records and statements recorded from Shri Digambar Nandi (Appellant No. 2 herein) and other persons mentioned above, the Department alleged that M/s. VSPL has cleared the dutiable goods manufactured by them without payment of duty, without invoice and by undervaluation, which renders such goods liable for confiscation under Rule 25 of the Central Excise Rules. Accordingly, a Show Cause Notice dated 09.02.2011 was issued to the appellant-company and to Shri Digambar Nandi, Managing Director of the appellant-company. The Notice demanded Central Excise Duty amounting to Rs. 1,67,57,630/- along with interest and proposed penalty under Section 11AC of the Central Excise Act and confiscation of the goods said to have been cleared clandestinely. The Notice also proposed penalty on Shri Digambar Nandi. After due process, the Notice was adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e removal is not sustainable. Metal Fitting (P) Ltd. v. Collector of C.Ex., Delhi [1997 (93) E.L.T. 747 (Tribunal)]: - wherein it was held entries in private diary and loose papers are not sufficient evidence to establish charge of shortages burden is on the Department to prove shortages and clandestine removal. Dulichand Silk Mills (P) Ltd. v. Commissioner of C.Ex., Hyderabad [2001 (133) E.L.T. 468 (Tribunal - Chennai)]: - wherein clandestine removal evidence statement of manager of assessee was held as not sufficient charge without verification of goods by the Department was set aside State of Orissa v. Chandrakanta Moda [33 STC (1974) (573 Orissa)]: - Wherein it was held undated entries in seized books account whether relate to particular period burden of proof lies on the Department. 4.3. The appellant further submits that Shri Nandi has retracted his statements by way of writing letters to the jurisdictional Commissioner and sworn in affidavit before the Notary Public. In this regard, it is their submission that the provisions of Section 9D of the Central Excise Act, 1944 have not been followed by the ld. adjudicating authority and hence the statements recorded in this case ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant submitted that the premises of DCPWB, from where the relied upon documents were recovered, belongs to the Smt. Chunia Nandi, wife of Shri Digambar Nandi, and that the said concern is an independent proprietorship concern and not a part of the appellant's factory. The Department has not identified the person who has made the entries in the said seized documents. The said note books/loose papers written mostly in pencil by unknown and unidentified persons, cannot be presumed to be documents relating to the appellant company. The author(s) of the seized documents have not been ascertained/identified by the Department and their relationship with the appellant company has not been established. 7.1. We observe that the impugned order has considered the documents seized from the premises of DCPWB as documents maintained by VSPL, on the basis of the statements recorded from the Managing Director on various dates. It is also alleged that some of the entries available in the seized documents tally with the invoices raised by the appellant for their actual transactions. Accordingly, the ld. adjudicating authority concluded that since Smt. Chunia Nandi is one of the Directors of VSPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the appellant-company. 7.3. In support of the above contention, the appellant relied upon the decision of the Tribunal Ahmedabad in the case Forward Resources Pvt. Ltd. Vs. Commissioner of Central Excise Service Tax, Surat-I [2023 (69) G.S.T.L.76 (Tri. -Ahmd.)], wherein it has been held as under: 5.2 We find that in the present matter it is on record that during the search at the premises of the Appellants, no invoices/debit notes etc., raised to their customers were found. The department in the present matter recovered the said alleged debit notes/invoices from the customers. The Business Premises of M/s. Consumer Marketing (India) Pvt. Ltd. was searched and documents/records were seized. Shri Rajesh Ramchandra Satve, Authorized Signatory of service recipient of M/s. Consumer Marketing (India) Ltd., in his statement admitted the receipts of taxable services from Appellant. We also noticed that presumption of documents in certain cases under Section 36A of the Central Excise Act is available only when the documents are produced by or seized from the custody or control of the person concerned, we also take into consideration the provisions of Section 36A of the Central Excise A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which he acted as a Commission Agent and received commission. The details of MS scrap purchased by Surendra Alloys but not accounted for in their Form IV register for the period 1-10-1988 to 13-1-1989 are contained in Annexure-XVI to the show cause notice (page 155 of the paper book). The annexure is reproduced below (at page No. 11). At page 186 of the paper book is a list of purchases of MS scrap made by the notices and entered in Form-IV register for which there is no reference in the diaries of Shri L.N. Garg. This list is reproduced below (at page No. 12 and 13). The statement of purchase of scrap month-wise for the disputed period is set out at page 188 from which it will be seen that the details of scrap and transactions not covered by the diaries is to the extent of 55.5% to 60.6%. The statement is reproduced below (at page 14). The appellants submit that if the diary is taken to represent only the accounts of M/s. Surendra Alloys then the stock of scrap should have been around 1000 MTs i.e. alleged purchases (details of which are found at page 155) less production (details at page 156) i.e. 3187 MTs - 2276 MTs while only 100 tonnes of scrap was actually found. A refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . and not in Metric Tonnes and consequently the entries at page 156 are to be construed as 18 quintals and 94 kgs. and 1.2 quintals and 1 kgs. One of the basic submission of the appellants before the adjudicating authority was that the consumption of electricity required for manufacturing the alleged disputed quantity was very high and that the consumption for the alleged quantity comes to only 200 Units per metric tonne whereas the minimum requirement under ideal condition is around 600 units per metric tonne and this ratio was corroborated by a certificate from an expert on Induction Furnace (Certificate dated 10-10-1990 from M/s. S.K. Consultants at page 194). This submission has been rejected by holding that there is mis-use of electricity by Induction Furnace owners which cannot be ignored. We agree with the appellants that this cannot be a ground for rejecting the appellant s submission on this point, particularly noting that during the relevant period, there is no such charge of electricity theft against the appellants by DESU and no demand therefrom. The adjudicating authority has taken into account whatever has been entered independently in the statutory records inspite of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the statement of the manager. This finding is not in consonance with the judgment of the Apex Court judgment in the case of Oudh Sugar Mills (supra) wherein it has been clearly laid down that burden of clandestine removal is required to be discharged by the department and mere assumption or presumption cannot be the basis for raising demand. Although in the present case Manager has given some figure the department had chosen to measure some quantity and found the same to be in order and dropped the proceedings. When it was convenient for the department to do physical verification for some portion of the goods, they should have done the same exercise for the other portion also. Merely because eye estimation was given it does not absolve of the department s responsibility to carry out physical verification of the goods and confirm demand duty on that basis. In view of the clear cut law laid down by the cited judgments, the appellants prayer is required to be accepted by setting aside the impugned order and allowing the appeal. Ordered accordingly. 7.6. In the present case, we observe that the author(s) of the seized documents have not been ascertained/identified by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the statement recorded under coercion, threat and duress cannot be relied upon to confirm the demands against the appellant company. 8.1. We observe that the ld. adjudicating authority has simply brushed aside the retractions as mere afterthoughts. When the statements recorded are retracted, its evidentiary value comes down. In such circumstances, further corroborative evidences required to substantiate the allegations of clandestine removal. We observe that other than the entries in the note books and loose sheets and the statements recorded, there is no other corroborative evidence available in this case. 8.2. In support of their contention, the appellant relied on the decision in the case of Krishna Co. v. Collector of C.Ex., Jaipur [1998 (97) E.L.T. 74 (Tribunal)], wherein it has been held that demand based on note books without any other evidence of production and clandestine removal is not sustainable. The relevant paragraphs of the said decision are reproduced below: 8. On a careful consideration of the matter, I am satisfied that the submissions made by the learned Advocate has got force. The learned Collector has not taken pains to verify the contents of the diary an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment are at liberty to carry out a second verification for which the assessee does not have any objection. The learned Counsel further submits that there has been no clandestine removal in the case as alleged but the statements were given in hurry and out of fear and although same was not resiled. He points out that a detailed reply to the show cause notice was given which has not been considered at all. It is also his submission that there is no cause to indulge in clandestine removal as the appellants had started the factory newly and they were in the business only for 5 months. Therefore, taking into consideration all these factors into account and the fact that the order is not a speaking order, it is but proper that the impugned order is set aside and the matter remanded to the original authority with a direction that the original authorities shall grant the appellants an opportunity of hearing and to defend their case. The original authorities shall carry out de novo proceedings in the light of law laid down by the Tribunal in the above noted judgments. 9. The appellant further submits that the provisions of Section 9D of the Central Excise Act, 1944 have not been followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein. 6. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J. K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T. 189 (Del.) = 2011 (22) S.T.R. 225 (Del.). Para 12 of the said decision clearly holds that by virtue of sub-section (2) of Section 9D, the provisions of sub-section (1) thereof would extend to adjudication proceedings as well. 7. There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 9D is required to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution. 8. As already noticed herein above, sub-section (1) of Section 9D sets out the circumstances in which a statement, made and signed before a Gazetted Central Excise Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner has also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 21831/1994, dated 3-1-1995 [since reported in 1995 (75) E.L.T. A177 (S.C.)], wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D (1) (a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby. 13. If none of the circumstances contemplated by clause (a) of Section 9D (1) exists, clause (b) of Section 9D (1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D (1), viz. (i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and (ii) the adjudicating authority has, thereafter, to form the opinion that, having rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) of Section 9D (1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice. 17. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-examination has to precede re-examination. 18. It is only, therefore,- (i) after the person whose statement has already been recorded before a Gazetted Central Excise officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise. 19. Clearly, if this 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 CCE, on the said statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to in the show cause notices issued to Ambika and Jay Ambey, it would be incumbent on the Revenue to apply to Respondent No. 2 to summon the makers of the said statements, 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 examination-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 availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine removal of sponge iron and no examination of bank accounts in support of excess realization towards sale proceeds of goods clandestinely removed. Thus, we observe that the Department has not brought in any other evidence other than the statements to substantiate the allegation of clandestine removal without payment of duty. 10.1. We observe that the allegation of clandestine clearance cannot be sustained on the basis of statements alone. There must be some positive evidences like purchase and consumption of unaccounted raw materials, discrepancy between recorded stock and physical stock, seizure of any goods en route, consumption of excess electricity, actual clandestine removal of finished goods without payment of duty, mode of removal, evidence of transporters and buyers of the clandestinely removed goods and flow back of funds pertaining to clandestine removals. We observe that the demands confirmed on account of clandestine removal in the impugned order without any of the above mentioned evidences are not sustainable. 10.2. This view has been held in the case of Continental Cement Company v. Union of India reported in 2014 (309) E.L.T. 411 (All.). The relevant paragraphs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding the penalty imposed on Appellant No. 2, the Managing Director, Shri Digambar Nandi, we observe that penalty has been imposed on him for his alleged role in the clandestine clearance and under valuation. The Department alleged that Shri Nandi, being the Managing Director of the company, was solely responsible to the business of the company and the alleged acts / commissions were made by him or at his instance and with his full knowledge; Personnel of VSPL viz. Shri Gopabandhu Pradhan and Shri Bhabani Sankar Mohanty, Assistant Accountant have in their statements dated 30.06.2009 (Ref. Q. No. 10 11 of statement of Shri Pradhan and Ref. Q. No. 10 of the statement of Shri Mohanty recorded under Section 14 of the Act have respectively stated that Shri Nandi, as Managing Director, was responsible for procurement of raw materials, valuation of Sponge Iron and Clearance of Sponge Iron from the factory of VSPL. It was alleged that he had kept the private records containing real sale details away from the factory at another location where he sits so as to avoid detection and has also admitted to the evasion of duty and maintenance of these records. However, in view of the discussions a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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