Commissioner, Central Excise & Service ... vs M/S Dincotex Pvt.Ltd

Appeal No.E/1172/2008-SM [Arising out of OIA No.KRS/180 to 183/VAPI/2008, dt.30.06.2008, passed by Commissioner (Appeals), Central Excise & Service Tax, Vapi]

Commissioner, Central Excise & Service Tax, Vapi Appellant

Vs

M/s Dincotex Pvt.Ltd. Respondent

Represented by:

For Appellant: Shri T.K. Sikdar, Authorised Representative For Respondent: Shri K.I. Vyas, Advocate

For approval and signature:

Honble Mr. P.K. Das, Member (Judicial)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM:

HONBLE MR. P.K. DAS, MEMBER (JUDICIAL)

Date of Hearing/Decision:17.04.2015

Order No. A/10338 / 2015, dt.17.04.2015

Per: P.K. Das

1. Revenue filed this appeal against the order of Commissioner (Appeals), where the Adjudicating order was set aside.

2. The relevant facts of the case, in brief, are that the Respondents were engaged in the manufacture of Man Made Fabrics classifiable under Chapter 54 and 52 to the Schedule to Central Excise Tariff Act, 1985. On 13.11.1995, the Central Excise Officers during the preventive check to the Respondents factory, prepared a Panchnama dt.13.11.1995, showing excess quantity of MMF (Processed) and shortage of the finished goods on the basis of diary.

3. A Show Cause Notice dt.06.05.1996 was issued by the Superintendent (Preventive) HPIU-V, Surat, proposing to confiscate the seized goods i.e. 261 pieces of Processed MMF and demanding the duty leviable on the seized goods and also proposed to impose penalty, which has been decided vide OIO No.29/ADJ/96/OA, dt.14.11.1996 by the Deputy Commissioner, Central Excise, Surat.

4. Another Show Cause Notice dt.28.01.2000 was issued by the Additional Commissioner of Cen.Excise & Customs, Surat-II, proposing demand of Central Excise duty of Rs.17,07,135.00 alongwith interest and impose penalty on the ground that the Respondents illicitly cleared the goods from their factory. It has also proposed to appropriate the amount of Rs.91,000.00 as paid by them during investigation. It has also proposed to impose penalty on the Respondent and its Director and Manager cum Authorised Signatory of the Respondent Company. By OIO No.24/ADJ/2001/ADC, dt.31.08.2001, the Additional Commissioner of C.Excise & Customs, adjudicated the Show Cause Notices including the earlier notifications and confirmed the demand of duty alongwith interest and imposed penalty. It has also confiscated the seized goods, which were already been adjudicated by Deputy Commissioner of C. Excise by OIO dt.14.11.1996. The said order was set aside by the Commissioner (Appeals) vide Order No.37-38/Valsad/2003, dt.10.04.2003 and remanded to the Adjudicating authority.

5. In de-novo proceedings, the Joint Commissioner of C.Excise & Customs, vide OIO No.53/AC/Vapi/OA/2004, dt.27.12.2004, again confirmed the demand of duty alongwith interest and imposed penalty and also confiscated the goods in respect of the two Show Cause Notices. The Commissioner (Appeals), Vapi vide OIA No.MCRS/212-214/VAPI/2005, dt.25.05.2005, remanded the matter to the Adjudicating authority for de-novo adjudication with the direction that the case may be considered afresh after granting cross examination of the persons as well as following the principles of natural justice. In de-novo proceedings, by the impugned adjudication order, the Joint Commissioner again confirmed the demand of duty along with interest and imposed penalty of equal amount on the Respondent and also imposed penalty in the Director and Supervisor-cum-Clerk of the Respondent Company. It has also confiscated the seized goods. By the impugned order, the Commissioner (Appeals) set aside the adjudication order. Hence, Revenue filed this appeal before the Tribunal.

6. After hearing both the sides and on perusal of the records, I find that the Commissioner (Appeals) observed that the Show Cause Notice dt.03.05.1993 in respect of seizure of the goods, has already been adjudicated by OIO No.29/Adj/96/OA, dt.14.11.1996, the Deputy Commissioner, Surat. The re-adjudication of the said case done by the Adjudicating authority in the present de-novo adjudication order, cannot be sustained. I agree with the findings of the Commissioner (Appeals). It is noted that the Deputy Commissioner, C.Excise already adjudicated the Show Cause Notice dt.06.05.1996 vide OIO dt.14.11.1996 and therefore, the confiscation of the goods and imposition of redemption fine in respect of the seized goods by the Adjudicating authority in de-novo adjudication cannot be sustained.

7. Regarding demand of duty along with interest and imposition of penalty by the Show Cause Notice dt.28.01.2000, I find that the Respondent challenged authenticity and the preparation of the Panchnama. It has contended that the demand of duty on the basis of the diary has no nexus with the Respondents factory. The Respondent also requested for cross examination. I find that the Commissioner (Appeals) has given detailed findings on this issue. The relevant portion of the impugned order is reproduced below:-

6.1 From the records, I find that during the checks conducted at the appellants factory premises, the officers recovered one original copy of Invoice No.29/09.11.95. The invoice was different than the regular invoices and showed clearance of 294 pcs of processed MMF admeasuring 27998 L.Mtrs valued at Rs.2,32,579/-. Further enquiries with Shri Sanjay Kothari showed that no entries pertaining to said clearances had been made in the Central Excise statutory records and no duty had been paid on the same. It was also revealed that other copies of the said invoice were kept blank. The officers also recovered three private diaries from the bed room of Shri Sanjay Kothari situated at the first floor, two of them written in pencil, containing details of grey MMF and processed MMF such as Pcs, L.Mtrs, Name of the party, Date of receipt and dispatch etc. In this respect, Shri Sanjay Kothari stated that grey fabrics shown in the said diaries were received by the appellants on different dates and after processing it, the same were cleared to the respective parties as per the details shown in column No.8/9 of the said diaries without accounting for the same in statutory records like R.G.

1 register and without preparing Central Excise Invoices. He further stated that grey fabrics for the said processed MMF were received under grey challans as recovered from the unit, from the parties through broker and the same were processed by allotting private code number alongwith fictitious lot No. as shown in Col.1 & 2 of diaries. The details of said diaries did not tally with Central Excise records. On calculation, it was noticed that 9014 pcs of processed MMF admeasuring 832748 L.Mtrs valued at Rs.1,70,71,352/- were cleared to the respective parties by the appellants without payment of duty due thereon. It was also noticed that 663 pcs of processed MMF admeasuring 62,551.70 L.Mtrs were lying in fully furnished and ready to dispatch condition against 38128 L.Mtrs as shown in RG-1 register because the difference was to be cleared without payment of duty. The officers seized the differential pcs i.e. 261 pcs of processed MMF admeasuring 24323.70 L.Mtrs value dat Rs.5,10,797.70 and handed over to the appellants for safe custody. Also, during the investigations a statement of Shri Mahendra D. Desai was recorded on 17.11.1995 wherein he among other things stated that he was manage of the appellants; that the records were being maintained by Shri Sanjay Kothari, nephew of the Director of the appellants and they got his signatures on them wherever required; that the diaries written in pencil were being maintained by Shri Sanjay Kothari; that goods received under the recovered under the recovered grey challans were processed and cleared by them to the parties as per the directions of the director of the appellants.

6.2 The appellants in their defence has stated that none of the persons of the company had made any admission of the offence during Panchnama, however they were compelled to sign the panchnama containing their confession of the offence; that they do not agree with the same and therefore they have retracted the same immediately on 14.11.1995 by way of a telegram and affidavit dt.14.11.95; Shri Rajendraprasad D. Tiwari, one of the panchas has also filed affidavit dt.14.11.95 that he was not present during the recording of the panchnama and that he was called at night at about 9.30 hrs and instructed to sign the panchnama which he signed and left to his factory. They also submitted that cross examination of Shri Mahendra D Desai has not been given to them.

6.3 I find that the impugned order of the Adjudicating authority is based solely on the details of the panchnama and the statement of Shri Mahendra D Desai, Manager of the appellant unit. From the panchnama, I find that the same has been signed by five persons viz. the two panchas i.e. Shri P.K. Mitra and Shri Rajendra Prasad D. Tiwari, Shri Sanjay Kothari, Shri Paras H. Jain and Shri Mahendra D. Desai besides the Superintendent of Central Excise, HPIU-V. Out of these five persons, three have retracted the same on the very next day vide affidavit dt.14.11.95 and stated that they were made to sign the panchnama under threat and pressure. In his affidavit dt.14.11.95, Shri Rajendraprasad D. Tiwari, one of the panchas has affirmed that he attended M/s Dincotex P. Ltd at about 9.30 at night where he was instructed to sign the panchnama and other papers which he signed and left for his factory. From the panchnama, I find that the same was completed at 21.00 hrs and accordingly as per his affirmation he was not present during the panchnama and was called only after the completion of the same.

From the affidavit of Shri Paras H. Jain, I find that he reached factory at about 5.00 PM and his signatures were obtained under threat and duress. As seen from the panchnama his version appears to be correct as his name figures only at page 5 of the panchnama where he is shown to have arrived after the completion of stock taking and recovery of incriminating documents. Likewise, Shri Mahendra D. Desai has also retracted his version of the panchnama and has affirmed that his signatures were obtained under threat and duress. Reliance has also been placed by the Adjudicating authority on the statement dt.17.11.95 of Shri Mahendra D. Desai where he is purported to have accepted the illicit clearance of the goods of details mentioned in the diaries. I find that even this statement has been retracted by Shri Mahendra D. Desai vide his letter dt.03.09.1998 written in Gujarati wherein he has stated that his statement was recorded in English and he did not know English and therefore he was not aware of the details mentioned in the statement and he signed it without knowing what is written in the statement.

No copy of the said statement was given to him. He also requested for recording of his further statement in the matter in view of above. I find that the Adjudicating authority has brushed aside above affidavits and the letter dt.03.09.98 of Shri Mahendra D. Desai and passed the impugned order without discussing the same and without giving any findings thereon. It was also noted that the Appellants time and again asked for cross-examination of the panchas and Shri Mahendra D. Desai to rebut the allegations made in the show cause notice and bring out the truth but the Department failed to produce them for cross-examination. The impugned order itself records the above fact that cross-examination could not be conducted. The Adjudicating authority records that time and again letters written to the panchas were being returned with the remarks left. It is but natural that when the addressee is not available at the given address all the letters written to him and sent by post at the given address are bound to return with the remarks left. After the return of first letter, there was no need to send the letter again by post and attempts should have been made to locate the present whereabouts of them by personally visiting the given addresses and conducting the necessary enquiries.

Also no efforts have been made to present Shri Mahendra D. Desai, who was present at the given address, for cross-examination. Letters written to him were being returned with the remarks refused to take delivery. He was deparments witness and as such should have been produced for cross-examination by any legal means. If required, recourse of sending summons through court could have been used by the Adjudicating authority. In nutshell, no attempt has been made by the Adjudicating authority to present the panchas for cross-examination inspite of the direction of Commissioner (Appeals) given by him while remanding the case for de-novo adjudication and as such I hold that principles of natural justice have been gravely violated in this case and the impugned diaries, Panchnama and the statement of Shri Mahendra D. Desai cannot be solely relied upon for establishing offence of illicit removal against the appellants unless corroborated with other evidence on record. For this, I refer and rely upon the Tribunal judgment in the case of Jitendra Kumar Ghishulal Jain  1998 (103) ELT 591 (Tri.)

8. On perusal of the above findings, it is clearly evident that the Commissioner (Appeals) had discussed the matter in detail on all the issues. Revenue filed this appeal against the impugned order only on the ground that by not producing the witnesses for cross examination, the Panchnama cannot be treated as invalid evidence. The learned Authorised Representative for the Revenue stated that Panchnama was prepared in the presence of the representative of the Respondent Company. Therefore, there is no requirement of cross examination of the Panchas. He further submits that the Panchas and others are not available. It is submitted that the Director and the employee of the Respondent Company in their initial statements accepted the recovery of the diary.

9. The Honble Delhi High Court in the case of Basudev Garg VS Commissioner of Customs - 2013 (294) 353 (Del.) held that the statement against the assessee cannot be used without giving them opportunity of cross-examining deponent. Cross-examination is a valuable right of accused/noticee in quasi-judicial proceedings, which can have adverse consequences for them.

10. In view of the above discussion, I do not find any reason to interfere the order of the Commissioner (Appeals). Accordingly, the appeal filed by the Revenue is rejected.

(Dictated & Pronounced in Court)

(P.K. Das) Member (Judicial)

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