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Case Law Details

Case Name : M/s. K.P. Pouches (P) Ltd. Vs CCE, Delhi-I (CESTAT Delhi)
Appeal Number : Excise Appeals Nos. E/1007 and 1010/2009-EX(SM), Final Orders Nos.50124-50125/2016
Date of Judgement/Order : 02/02/2016
Related Assessment Year :

CA Urvashi Porwal

Urvashi PorwalBrief of the Case

In the case of M/s.K.P. Pouches (P) Ltd. Vs. CCE, Delhi-I, it was held that in case of clandestine clearance of goods, wherein the Revenue has discharged the burden of corroborating, establishing clandestine clearance of dutiable items from the appellant’s unit and wherein the appellant is merely contesting the duty demand and penalty on the ground that the detailed further investigation regarding raw materials procurement, transport of such raw materials etc. has not been done by the Department, the Revenue is able to establish with different source  of evidence  by way of independent statements and corroborative evidences and no further investigation is required from department’s end.

Facts of the Case

The appellants are engaged in the manufacture of “gutkha” with “Raj Shree” and “Safal” brand, liable to central excise duty. Based on certain  information about illicit clearance of these items by appellant, investigations were carried  out by the officers.  The officers intercepted two vehicles outside the Railway Parcel Office, New Delhi. The vehicles  were found loaded 25 bags each of “gutkha”. No proper documents evidencing illicit transport or duty payment were available and hence the officers seized the goods totally valued at Rs.7,71,000/- along with the vehicles. Further, investigations were conducted. Four kachcha slips with some details written thereon were found with the drivers  of the vehicles. Statements of the Director of appellant company, Supervisor and drivers of the vehicles were recorded. Stock taking at the factory has shown 50 bags of “Raj Shree” brand and five bags of  “Safal” brand gutkha in excess.

After investigation, proceedings were initiated by issue of show cause notice dated 16.09.2005 against the appellant  and others. After due process, the case was adjudicated by the Joint Commissioner, who, among other things,  ordered confiscation  of seized goods  and vehicles; allowed  their redemption on payment of fines; confirmed demand of Rs.10,38,074/-; imposed various penalties on appellant company  and others. On appeal, the Commissioner  (Appeals), vide impugned order upheld the original order. The present appeal is against this order. Before the case was adjudicated by the Original Authority, the appellant approached the Settlement Commission. Their application was rejected by the Settlement Commission vide order dated 24.01.2007.

Contentions of the Assessee

The assessee submitted that the present demand was confirmed based on a set of 8 kachcha slips recovered from the possession of drivers of two vehicles in question. There is no corroborative evidence regarding purchase and consumption of raw materials, actual production and clearance of final products; identity of buyers, transport details, and payment. In absence of such corroboration, the confirmation of demand and imposition of penalties on the appellant is legally unsustainable.

Contentions of the Revenue

The Revenue supported the findings in the impugned order and submitted that the case is not made out only on the basis of kachcha slips. There are coherent and clear evidences corroborating unaccounted  clearance of dutiable gutkha from the appellant’s factory. The admitted facts is that 50 bags of gutkha found in the two vehicles  have been cleared without payment of duty and without proper records. This fact has been fully admitted and duty liability has been fully discharged by the appellant and has not been disputed thereafter. Similar to the private records covering seized goods, 8 other slips were found with the same vehicle  drivers,  who admitted categorically about the clearance of similar consignments as indicated in the slips recovered from them. This has been independently  corroborated by the Supervisor of the appellant company and the Director of the appellant company also. All these statements have never been retracted.

Held by Hon’ble CESTAT

The Hon’ble CESTAT stated that the present case is regarding unaccounted clearance of dutiable items by the appellant. The evidences brought forward by the Revenue are,  8 hand written slips recovered from the two drivers of the vehicles, which was intercepted in the railway booking yard, New Delhi; statements given by the Drivers regarding transport of gutkha, which was found inside the vehicle and past transport of similar gutkha from the appellants factory;  statement of Shri Rana, Supervisor of appellant  company corroborating  and admitting such clearances as explained by the drivers; statement of Shri Tripathi, Director  of the appellant company  corroborating and admitting such unaccounted clearance of dutiable items as indicated in the hand written slips recovered from the drivers and admitted by the drivers as well as Supervisor of the appellant company. It is also relevant to note that regarding the physical seizure of 50 bags of gutkha from these vehicles, the appellant have admitted unaccounted clearance and discharged the duty liability. This is not disputed even now. Similarly, there were excess stock of dutiable items found in the appellant’s unit on follow-up physical verification by the officers. This has also been accepted and entered in the statutory records thereafter by the appellant. On perusal of all the statements and private slips, the contents  of which were explained in this statement, it is clear that the clandestine clearance of dutiable items have been brought  forward with corroborative evidences  from more than one source and there is no discrepancy while collating such  evidences. The Revenue has discharged the burden of corroborating, establishing clandestine clearance of dutiable items from the appellant’s unit. It is seen that the appellant is merely contesting the duty demand and penalty on the ground that the detailed further investigation regarding raw materials procurement, transport of such raw materials etc. has not been done by the Department. It is an admitted fact that clandestine manufacture is unaccounted  and the appellant  did not dispute such clandestine manufacture and clearances, where the goods were seized physically. On similar set of facts, where the goods were  not available, the appellant is contesting on the basis of lack of corroborative evidences.  In other words, the appellant’s case  appears to be when there is a physical seizure of unaccounted clearance such activity is established or otherwise, further corroboration is required. In the present case, the Revenue is able to establish with different source  of evidence  by way of independent statements by the drivers of the transporting vehicles, corroborated by the Supervisor of the appellant’s unit and finally  fully corroborated and admitted by the Director of the appellant’s unit. These facts  have not been controverted by any material evidence by the appellant. Their only  objection is that more corroboration regarding the actual buyers of the clandestinely removed goods and details of money received  etc. is not available.

The Hon’ble CESTAT found that the statements given by the Director  mention about sale of gutkha on cash basis  without preparing any bill or entering in the statutory records. The purchase of raw materials is also on cash basis without any accounting. He also admitted that the entries and the contents of the private records in the form of kachcha slips recovered  from the drivers of the vehicles. Similar  kachcha slips covering the seized goods were admitted and not disputed even now. As mentioned earlier, all the evidences are similar for the seized goods as well as the goods  earlier cleared  on the same modus operandi except that in respect of 50 bags, there is a physical seizure of clandestinely removed goods. The private records  were corroborated by three different persons and the statements are not retracted thereafter. It is relevant to note that the appellant approached the Settlement Commission for settling the case. However, the same was rejected by the Commission, which resulted in the continuation of departmental adjudication and appeals thereafter. The present case is not the one which is based only on statement of the Director of the appellant company. It is based on the private records seized from the transport drivers corroborated by three different persons. The case laws relied upon by the appellant are not relevant and applicable to the present case. In Kuber Tobacco  – 2013 (290) ELT 545 (Tribunal-Delhi), the Tribunal was dealing with the case of statement which was retracted. In Pan Parag India – 2013 (291) ELT  81 (Tribunal-Delhi), source of private records was not available.  In the present case,  private slips were recovered from the drivers, who were transporting  the unaccounted non-duty paid gutkha. The authenticity of the kachchha slips have been admitted by three different persons. In Continental Cement – 2014 (309) ELT 411 (Allahabad), the Hon’ble Allahabad High Court was dealing with  genuineness of the documents seized. The Hon’ble High Court held that for clandestine removal, corroborative evidences are required like raw materials purchase, power consumption, sale proceeds, etc. In the present case, unaccounted production and clearances were evidenced by the categorical admission of the Director and Supervisor of the appellant company  and there were kachcha slips seized along with goods.

Considering the above discussions and findings, the appeal is rejected.

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