Case Law Details

Case Name : Shri Avinash M Baliga & Others Vs Commissioner of Central Excise (CESTAT Delhi)
Appeal Number : Excise Appeal No. 1441-1444 of 2008, FINAL ORDER NO. 50025-50028 /2016-EX(DB)
Date of Judgement/Order : 15/01/2016
Related Assessment Year :
Courts : All CESTAT (169) CESTAT Delhi (53)

CA Urvashi Porwal

Urvashi Porwal

Brief of the Case

In the case of M/s. Balajee Perfumes Vs. Commissioner of Central Excise, it was held that in order to prove clandestine removal of excisable goods, the department should take reasonable steps and provide correlated corroborative evidence to prove that the assessee has made cladenstine removal of goods. Further, it was also held that the statements of the various parties should be considered in an holistic manner in order to prove the intent of the assessee in regards to clandestine removal.

Facts of the Case

The facts of the case are that on intelligence  by DGCEI that M/s. Balajee Perfumes (M/s. BP) were manufacturing and clearing Maruti, Ajeet and Kaveri branded Gutkha clandestinely without payment of Central  Excise duty by suppressing the production, searches were conducted in the state of Karnataka on 7.10.2004 and certain records were seized.   Documents recovered indicated that (M/s. BP) has been manufacturing and clandestinely removing Maruti, Ajeet and Kaveri branded Gutkha to their distributors/ dealers located  in the state of Karanataka without invoices / bills by rail or sometimes by road through the transporters  namely, M/s. Lion Roadway, M/s. Uday Roadlines, M/s. Puja Roadways etc.   Further investigation made to the Railway authorities   at  Hubli, Belgaum and Kankanadi (Mangalore) and the details of the Railway Receipt No. (RR No.) date of booking, number of bags  dispatched and the name of the consignor and consignee were obtained wherein it was found that bookings were made in fictitious names  by misrepresenting the description  of the goods  as sweet supari / Meethi supari / zarda supari / kirana except choti.  The  name of the consignor  and the consignee are the same.   The bookings were made  from Hazrath Nizamuddin  Railway Station, New Delhi   on a particular day reach the destinations, Hubli, Belgaum and Kankanadi  on the alternate day.   No documents evidencing payment of Central Excise duty accompanied the consignments and subsequent verifications established that no such documents were raised in respect of such clearances.    As per the railway records, it was found that during the period August, 2001 to September, 2004, 33,053 bags were booked through Railways.   Thereafter, the statements of Shri   Pawan  M Prabhu and Shri  Avinash M Baliga and Shri Suresh Rao were recorded. On the basis of statements, various records recovered during the course of search and railway receipts, a show cause notice was issued to demand duty of Rs. 7,88,64,986/- on 33053 bags of gutkha on the allegation that M/s. BP has cleared Maruti, Ajeet and Kaveri branded Gutkha having MRP value of Rs.0.50  per pouch during the period October, 2001 to 7.10.2004.  The matter was adjudicated and after adjudication demand of Rs. 4,50,64,179/- was confirmed against M/s. BP along with interest and equivalent amount of penalty of Rs.5 lakh each was imposed on co-appellants. Aggrieved from the said order,  the appellants are before the tribunal.

Contentions of the Assessee

The assessee submitted that the adjudicated authority has divided duty in two parts namely, for the period April, 2004 to October, 2004 on the  basis of small books seized from the premises of M/s. Devakikrishna Traders of Hubli who was the distributors of M/s. BP.   The second quantification is for the duty demand  for the period October, 2001 to March, 2004 and duty of Rs. 1,03,94,055/-  was also confirmed on the quantity of 4529 bags of Maruti Gutkha cleared to M/s. Damodar Traders as per the diary seized from proprietor  thereof.

The entire demand has been confirmed on the basis of seized documents from third parties  namely M/s. Devakikrishna Traders of Hubli and M/s. Damodar Traders, Belgaon.    A reliance was  also placed on inculpatory statement of Shri   Pawan  M Prabhu  of M/s. Devakikrishna Traders of Hubli and Shri  Avinash M Baliga,   of M/s. Damodar Traders, Belgaon.   The appellant requested for cross examination of both the witnesses which was turned down by the adjudicating authority.   The denial of cross examination is in violation of provisions of section 9(D) of the Central  Excise Act, 1944.   Therefore, on this sole ground, impugned order is required to be set aside in the light of decision of M/s. Aswani & Co. [Final Order No. A/54559-54565/2014]   dated 2.12.2014 wherein it has been  held that no reliance can be placed  on the statements which have not been examined under section 9D (1) (2) of the Central Excise Act, 1944.

The whole case is based upon the allegation, the evidences gathered from Railways and transporters to allege  that bookings were made by M/s. BP to three places namely, Hubli, Belgaum  or kankandadi  under the fictitious names under the description of goods as sweet supari /meethi supari / zarda suparai /kirana except choti.  In this regard, the assessee submitted that various charts were prepared by Railway department and relied upon as such by the authorities below, shows that the railway authorities has only relied upon the RRs numbers stating at the top that the same were details of consignments of gutkha / sweet supari /meethi supari / zarda suparai /kirana except choti/ general goods consigned to Hubli Railway station or to Belgaum Railway station.   As the Railways department has never stated that these consignments were booked by M/s. BP, but   they only certified that the consignments were booked as gutkha / sweet supari /meethi supari / zarda suparai /kirana except choti to Hubli Railway station  and Belgaum Railway station.

While confirming duty demand, the learned Commissioner  (for the period April, 2004 to October, 2004) has not relied upon the information provided by the railway authorities i.e. railway receipts but   the show cause notice also relied upon the diaries seized from the premises  of  M/s. Devakikrishna Traders.   The diaries seized cannot be the sole basis for demanding duty. It is further submitted that to demand duty  for the period October, 2001 to March, 2004, the learned Commissioner held that Maruti Gutkha was booked from Delhi to Hubli by describing “kirana except choti”.  It is  observed  by the authorities that none of the persons either the partners  of M/s. BP or any of the dealers have been examined for the details furnished by Railways with regard to  the description of goods   and it was held that no records were available for the consignments and the Commissioner relied upon the number of  bags entered in the diaries of Shri Pawan  M Prabhu and Shri Avinash M Baliga.  The learned Commissioner held that the evidence procured  from the railway  are only of corroborative nature though in  the show cause notice, same has been treated as  main evidence.  As without  the transportation of the goods, it could not be held that there was any clandestine removal  of the finished goods, more  specially when the other evidences  which were seized from the third party  and not from the premises of M/s. BP.   Once the  Commissioner found the evidence procured from the railway not to be reliable in  nature, it was not open for her to confirm the duty demand only on uncorroborated evidence,  more especially the same was third party evidence  and did not show  any sale and purchase of Maruti brand gutkha.   The diaries recovered from Shri Pawan  M Prabhu cannot be relied when Shri Pawan  M Prabhu categorically stated that he was dealing with numerous items such as supari, gutkha, beedi, cigarettes stationary items sweets and confectionary items and for this fact Shri Pawan  M Prabhu has filed an affidavit before the learned Commissioner.

It was further submitted that the learned Commissioner did not  allow the cross examination of various witnesses and three buyers namely, Shri Pawan  M Prabhu, proprietor of M/s. Devakikrishna Traders, Shri Avinash M Baliga proprietor of M/s. Damodar Traders, Belgaum and Shri Suresh Rao, proprietor of M/s.  Maruti Agency, Mangalore, who have filed their respective affidavits stating the correct facts wherein they had clearly stated that they never received any Gutkha from M/s. BP  under fictitious names.    The ld.Commissioner has termed these affidavits are as an after thought.  Infact, the adjudicating authority  was required to examine the persons who have filed the sworn affidavits during the course of adjudication proceedings.

Contentions of the Revenue

The Revenue submitted that it is a case of clandestine manufacture and clearance of excisable goods i.e. gutkha without payment of duty and without  the cover of any invoice through railway or various transporter of M/s. BP  through distributor located in Hubli, Belgaum  or kankandadi Mangalore.   The case has been made out on the basis of information received by DGCEI  and the investigation was started wherein the Railway was asked to furnish the details of dispatch from Hazarat Nizzamudin Railway station, New Delhi to Hubli station in respect of goods given description as kirana except choti.  On the basis of details of railway receipts received from the Railways and investigations reveal   from M/s. Devakikrishna Traders, Hubli,  M/s. Damodar Traders, Belgaum and M/s.  Maruti   Traders Managalore and on the basis of various dairies seized which corroborates the railway receipts  in respect of gutkha received without payment of duty and after corroborative statements of Shri Pawan  M Prabhu, Shri Avinash M Baliga, Shri Suresh Rao, and Shri Varun Gupta, Managing partner of M/s. BP, the case has been made out  against the appellants, who were engaged in clandestine manufacture and clearing of gutkha without payment of duty or raising invoices. As per various statements of persons recorded during the course of investigation itself has corroborated with the records seized,  therefore, the   impugned order is to be sustained.  It was further submitted that M/s. Devakikrishna Traders, Hubli were dealing with  M/s. BP and Shri Ajay Gupta who is younger brother of Shri Abhey Gupta who is father of Shri  Varun Gupta, partner of M/s. BP  who  is the Managing Partner of M/s. BP.   Therefore, they are related to each other and Shri Varun Gupta in his statement  has accepted that the activity undertaken by Shri Ajay Gupta are on behalf of M/s. BP.   Therefore, Shri Ajay Gupta was not required to be investigated in the case and the same cannot be in any way vitiate the case or dilute the case.  It is further submitted that appellant was engaged in the clandestine activity and they are not maintaining records of their clandestine  activity.  The activity of clandestine removal of goods can be revealed from personal knowledge   as held by Hon’ble  High Court of Gujarat in the case of Magan Lal Gulap Chand Shah vs. Union of India [1992 (59) ELT 235]. In the case of  Jagdish Shankar Trivedi vs.  Commissioner of Customs, Kanpur [2006 (194) ELT 290 (Tri-Delhi)] denial of cross examination of inculpatory statement  of dealers and owners  is not breach of  natural justice.

Held by Hon’ble CESTAT

The Hon’ble CESTAT stated that on going through the statement, it was found that M/s. Devakikrishna Traders, is proprietorship of Shri Pawan  M Prabhu have been dealing with one Shri Ajay Gupta of M/s. BP.  All the orders  were placed to Shri Ajay Gupta and all the payments of the said goods were made to Shri Ajay Gupta or  on the direction of Shri Ajay Gupta.   Moreover, the payments were made to one M/s. Hostota Arecanuts Traders, Shimoga on  behalf of Shri Ajay Gupta who deals in supari with M/s. Hostota Arecanuts Traders, Shimoga.

It was found through the extracts of the diary recovered from the premises of Shri Pawan  M Prabhu that the diary is  having the named of Balajee on 18.7.04.  But other entries are in the name of other  persons.  There is no co-relation of the entries  given in the  diary with the clearance made by M/s. BP.

It was also found that Shri Ajay Gupta who was engaged in the  activity of  sale on behalf of M/s. BP to M/s. Devakikrishna Traders,   distributor   was not  investigated to  prove the case of the Revenue.  In the  absence of any investigation made to Shri Ajay Gupta, the truth of the case cannot be revealed.  It is not the case of the Revenue that Shri Ajay Gupta and Shri Varun Gupta  is the same person and it is not admitted by Shri Varun Gupta that he has authorized Shri Ajay Gupta  in dealing with the distributor  M/s. Devakikrishna Traders  on his behalf  or on behalf of M/s. BP, the investigation of Shri Ajay Gupta is essential failing which the case of revenue has no legs to stand.   Further,   we also find that Shri Ajay Gupta is a trader  of supari.  In that circumstances, without bringing Shri Ajay Gupta on record, the truth of clandestine removal of gutkha of  Maruti brand  of M/s. BP cannot be proved.

The Hon’ble CESTAT further found that in the show cause notice, the  extract received from railways was made a part of the main basis to demand duty from M/s. BP.   We have gone through the information received from the railways.  Railways has given that  extract of  transportation of the goods during the impugned period  wherein the query was made to Railway that a case has been booked against M/s BP New Delhi who manufacture gutkha under brand name of Maruti, Ajeet and Kaveri for evasion of Central Excise duty.   The said gutkha is booked  in Indian Railways from Hazrat Nizzamuddin Railway station. In the  invoice raised for this purpose  the description of the goods is given as kirana goods except choti and consignor and consignee are fictitious names.  Railways were inquired about the case and n this regard, it was requested them  to furnish details of railway receipts with the above said description along with the quantity booked, for the last five years.

It was seen that details furnished by Railways are vague and even the learned Commissioner itself  in the impugned order has found no basis to rely on the details given by the Railways, to allege clandestine removal of the goods.   Therefore, the Railway receipts cannot be the basis to make the case of clandestine removal  of goods.  Therefore, the  said evidence is not admissible.

Revenue has also relied on the extracts of diaries recovered from Shri Pawan  M Prabhu and Shri Avinash M Baliga.  These  extracts of the diaries alleged to be accepted by Shri Varun Gupta in his statement. In fact, the statement of Shri Varun Gupta itself is contradictory as one  hand Shri Varun Gupta in  his statement stated that he is not knowing the contents of the diaries  and on the other hand, he accepts that the contents of entries made in the diaries.  Therefore, the said statement lost its evidentiary value.  Moreover, the contents of diaries are not self-explanatory.   Therefore, in the absence of any corroboratory evidence to the  contents of diaries, the diaries recovered  during the course of investigation are not relatable evidence to allege M/s. BP for clandestine removal of goods or clandestine receipt of goods by the distributor / traders.

In the impugned order, the statement of appellants were relied upon by the adjudicating authority to allege clandestine manufacture and removal of goods. It was found that all the appellants  filed  their  affidavits and these affidavits have not been examined.   Therefore, statements  given at the time of investigation cannot be blindly relied,   as affidavits   supplied by the appellants have substantial evidentiary value.  Moreover, no cross examination has been granted by the adjudicating authority to reveal the truth in the matter.   Therefore, the statement of appellants are not reliable in the absence of corroboratory evidence  .  In these circumstances, the Hon’ble CESTAT relied on the decision of this Tribunal in the case of M/s. Aswani & Co. (supra).

It was further noted that the fact that Shri Ajay Gupta who is prime witness of the case was not examined and is not made  the party to the case.  In the light of the decision of this tribunal in the case of M/s. Aswani & Co. (supra) and the discussion herein above, the case of the revenue remains inconclusive.   Therefore, it was held  that investigation conducted by the Revenue having loopholes is not proper.  Accordingly,   the allegation of clandestine manufacture  and removal of goods  is not sustainable.  Consequentially, the impugned order is not sustainable in the eyes of law and the same has been set aside.

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Posted Under

Category : Excise Duty (3860)
Type : Judiciary (8910)