2004 (97) ECC 175 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(C)

Shri S.S. Kang, Member (J) and Shri V.K. Agrawal, Member (T)

M.H.Textiles Ltd. & Ors.

Versus

CCE, Faridabad

Appeal No. E-977-979/2004-NB(C)

[Arising out of Order-in-Original No. 49/JKB/2003 dated 4.12.2003 passed by the Commissioner, Central Excise, Delhi-IV, Faridabad]

Final Order No. 510-12/2004-NB(C), dt. 29.7.2004, Certified on 9.8.2004

Clandestine removal

The demand of duty has been confirmed against the Appellants and the penalties have been imposed on them on the basis of the entries of the goods manufactured and cleared mentioned in the notebooks -- In absence of any corroborated material brought on record by the department, the demand of duty on the basis of notebooks alone cannot be sustained more so when the Appellants has created a reasonable doubt about these being the same notebooks which were seized from their premises during search on 14.9.98. The Revenue has not succeeded in establishing the clandestine manufacture and clearances by the Appellants.

The RG-1 register was also seized on 14.9.99. None of the customers mentioned in the notebook was contacted by the Department nor any evidence had been brought on record as to how the alleged goods were sent to them. No question seems to have been put to Shri J.P. Keshwani, Director, about the entries made in the notebooks nor his statement was recorded on 14.9.99 itself. No material/evidence has been brought on record as to the procurement of the raw material for effecting the alleged production in respect of which duty has been demanded from the Appellants. The statement of Shri N.K. Govila can also not be relied as he was not made available for cross examination by the Appellants.

Appeals allowed

PRESENT :

Shri Naveen Mullick, Adv. for the appellants.

Shri U. Raja Ram, JDR for the respondent.

Cases Cited :

1. Durga Trading Co. v. CCE, Lucknow, 2003 (59) RLT 273 (CEGAT).................. [Para 2.2]

2. Ghodavat Pan Masala Product Ltd. v. CCE, Pune, 2004 (62) RLT 891 (CESTAT) [Para 2.2]

3. Godawari Steel Pvt. Ltd. v. UOI, 2003 (157) ELT 31 (Bom)................................ [Para 3]

4. International Cylinder v. CCE, Chandigarh, 1999 (112) ELT 584 (T).................. [Para 2.2]

Per : V.K. Agrawal

In these three appeals filed by M/s. M.H. Textiles Pvt. Ltd. and others, they are challenging the Order-in-Original No. 49/2003 dated 4.12.2003 by which the Commissioner has confirmed the demand of duty and imposed penalty on all the three Appellants on the ground that the private records seized at the time of visit of the officers show more clearances than the clearances reflected in the statutory record RG-1.

2.1 Shri Naveen Mullick, learned Advocate, mentioned that the Appellant company process the cotton and man-made fabrics; that the officers of the Directorate General of Anti-Evasion searched the factory, head office, and residential premises of Directors and panchnamas were drawn at the respective premises; that the demand of duty is based on the entries made in small sized notebooks carrying the cover title as "Bindal Duplicate Note Books" which according to the Department were recovered from their factory premises on 14.9.99; that the Appellants have challenged the recovery of Note books by drawing attention of the Adjudicating Authority to the Panchnama dated 14.9.99 which showed that the notebooks resumed were "Jindal Duplicate Notebook"; that the Notebooks supplied to them by the Department do not belong to them and it has to be established by the Department that the same belong to them; that the Bindal Duplicate Notebook' supplied to them did not bear the signature of either the panchas or the officers of the Appellants; that there is no evidence brought on record which can connect them with the supplied records on the basis of which the demand of duty has been confirmed by the Commissioner. He mentioned that though the Commissioner has observed in the impugned Order that there were infirmities in the investigation, he has held that the relied upon documents were the seized private documents of the Appellants and these documents showed excess clearances of the excisable goods; that the Commissioner has failed to appreciate that the burden to prove the recovery of records and the charge of clandestine clearance is always on the Department; that the Department has not discharged the said onus.

2.2 He further submitted that the Adjudicating Authority has given the finding that the entries in the seized books could not be corrrelated with the RG-1 register as the same was not submitted by the Appellants at the time of search; that this finding is totally incorrect since Annexure `A' to Panchnama dated 14.9.99 drawn by the officers which confirms resuming of RG-1 register for the year 1998-99; that the dispute in the present appeals is only with regard to the period from September 1998 to October 1998 and for the said period RG-1 register had been resumed by the officers as per Panchnama dated 14.9.99 (Sl. No. 21). He also mentioned that after a period of one year, the statement of Shri Rahul Keshwani, Authorised Signatory, was recorded on 9.8.2000 when he was confronted with the notebooks; that Shri Rahul Keshwani clearly stated in his statement that notebooks had no connection or relation with the Appellant company; that these findings of the Commissioner regarding Rahul Keshwani admitting the disputed record is based on presumptions and surmises and is against the facts on record. The learned Advocate, further, contended that there is no evidence with regard to clandestine procurement of the raw material for alleged manufacture of fabrics measuring 8,29,771.370 Mts.; that there is also no evidence in the form of any statement where by any employee or even the Director having confirmed such alleged production and clearance by the Appellants; that both the show cause notices and the impugned Order are silent about any investigation or any customer's name in the notebook or from the transporter confirming alleged removal of the finished goods by the Appellants; that there is a reference about the statement of one Shri N.K. Govila, proprietor of M/s. N.G. Enterprises, who is alleged to have stated about some consignments having received from the Appellants as mentioned in the notebooks in question; that Govila has further stated that his employee Shri M.K. Khurana has signed the records for having received the goods; that neither Shri Rahul Keshwani was confronted with the statement of Shri N.K. Govila nor any statement of Shri M.K. Khurana has been recorded by the Department; that the cross examination of Shri Govila was declined by the learned Commissioner; that accordingly uncorroborated statement of Shri Govila cannot form the basis for implicating the Appellants in clandestine removal of the goods. Learned Advocate has relied upon the decision in the case of International Cylinder Pvt. Ltd. v. CCE, Chandigarh, 1999 (112) ELT 584 (Tri) wherein the Tribunal has set aside the demand based on entries in the Octroi/Sales tax/Police Barrier holding that the allegation cannot be stated to have been substantiated to any reasonable existence any one material on record and the Department's case suffered as there is no clinching evidence on record to show that the materials required for manufacture of alleged cylinders have been received and further statements relied upon by the Department had not been tested by cross examination. Reliance has also been placed on the decision in the case of Durga Trading Co. v. CCE, Lucknow, 2003 (59) RLT 273 (CEGAT) wherein the charge of clandestine removal has been held to have not been established as no tangible evidence of alleged removal of goods has been produced; that the appeal filed by the Revenue has been dismissed by the Supreme Court as reported in 59 RLT F6. He has also relied upon the decision in the case of Ghodavat Pan Masala Product Ltd. v. CCE, Pune, 2004 (62) RLT 891 (CESTAT). Finally he mentioned that the value taken by the Department for demanding the duty is not correct as it is not known on what basis and evidence the value has been worked out by the Department; that in Para 1.6 of the impugned Order it is mentioned that the value has been worked out on average basis for which there is no legal sanction.

3. Countering the arguments Shri U. Raja Ram, learned DR, submitted that there is no reason to rely upon small notebooks which were seized from the premises of the Appellants; that there could be typographical mistake in writing `Jindal' instead of `Bindal' while preparing Panchnama; that the Panchnama had been duly signed by Rahul Keshwani, Authorised Signatory of the Appellant company; that the mere fact that each individual notebook has not been attested by the Panchas or by any representative of the Appellant company does not disturb the factual position that the notebooks had been recovered from the Appellants only; that these notebooks had been recovered from the factory premises of the Appellants and it is their responsibility to explain the entries made in these notebooks. The learned SDR emphasized that some of the clearances mentioned in the notebook do tally with the entries made in RG-1 register maintained by the Appellants; that this fact goes to show that the notebooks pertain to them only; that the information contained in these notebooks is very much explicit as the name of the customers, date of clearance, description and the quantity of the fabric had been mentioned; that some even bore the signature of the customers who had received the goods. The learned SDR relied upon the decision in the case of Godawari Steel Pvt. Ltd. v. UOI, 2003 (157) ELT 31 (Bom) wherein the Bombay High Court has held that the demand of duty is sustainable on the basis of entries made in the record seized during the search and duly signed by the Managing Director of the company. Regarding value of the goods the learned DR reiterated the findings as contained in the impugned Order.

4. We have considered the submissions of both the sides. The demand of duty has been confirmed against the Appellants and the penalties have been imposed on them on the basis of the entries of the goods manufactured and cleared mentioned in the notebooks. It has not been disputed by the Revenue that the Panchnama dated 14.9.99 mentions seizure of 5 numbers of `Jindal duplicate Notebooks' whereas notebooks supplied to the Appellants are `Bindal duplicate notebooks'. It has also not been disputed by the Revenue that none of these note books were carrying the signature of any of the persons in whose presence these notebooks were seized i.e. neither the signature of the panchas nor any officers of the appellant company nor the signature of Central Excise Officers who had seized the same. The Appellants' main contention is that these notebooks do not belong to them. In view of the fact that the name of the notebooks mentioned in Panchnama differs from the notebook supplied to the Appellants and there being no signature of any person to show that these were the same books which were seized from the factory premises of the Appellant company, a reasonable doubt has been created about the genuineness of these notebooks. In the impugned Order a reference has been made that Rahul Keshwani in his statement dated 14.9.99 has deposed that clearances mentioned in the seized books would tally with the clearances mentioned in RG-1 register, and it is also mentioned in the impugned Order that as the statutory record i.e. RG-1 register was not submitted by the Appellant at that time no cross checking of the seized private records with the RG-1 could be done at that time. A perusal of the statement of Rahul Keshwani reveals that it was with reference to books recovered from the factory premises. It was not with reference to any specific register or record. It was merely a general statement. Further, he has specifically mentioned that the details therein would tally with their statutory records.

The learned Advocate has rightly emphasized that the RG-1 register was also seized on 14.9.99 itself as it appears that as one of the seized register at Srl. No. 24 of the Annexure to Panchnama. We also find force in the submissions of the learned Advocate that none of the customers mentioned in the notebook was contacted by the Department nor any evidence had been brought on record as to how (sic) the alleged goods were sent to them. No question seems to have been put to Shri J.P. Keshwani, Director, about the entries made in the notebooks nor his statement was recorded on 14.9.99 itself. No material/evidence has been brought on record as to the procurement of the raw material for effecting the alleged production in respect of which duty has been demanded from the Appellants. It has been consistently held by the Tribunal that the clandestine removal has to be proved by evidence such as purchase and utilization of raw material, labour employed, power consumption etc. The learned Advocate has referred to some such decisions. The statement of Shri N.K. Govila can also not be relied as he was not made available for cross examination by the Appellants. In absence of any corroborated material brought on record by the department, the demand of duty on the basis of notebooks alone cannot be sustained more so when the Appellants has created a reasonable doubt about these being the same notebooks which were seized from their premises during search on 14.9.98. Thus, the Revenue has not succeeded in establishing the clandestine manufacture and clearances by the Appellants. Accordingly we set aside the impugned Order and allow all the 3 appeals.

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