S.S. Kang, Vice-President

The appeals filed by M/s. Prince Gutka Ltd. & Ors. were allowed by the Tribunal vide order dated 5.10.2001. Thereafter, on appeals tiled by the Revenue, the Honble Supreme Court remanded the matter to the Tribunal vide order dated 1.9.2003 to decide the appeals filed by the assessee as well as the Revenue together. In pursuance to the orders passed by the Honble Supreme Court all the appeals are being taken up together for hearing.

2. Brief facts of the case are that M/s. Prince Gutka Ltd. are engaged in the manufacture of Pan Masala under the Brand name of Prince Gutka & Yamu. A show cause notice was issued on 12.9.1995 to the appellants on the ground that M/s. Prince Gutka Ltd. cleared Pan Masala without payment of duty as well as by under-valuing the price of Pan Masala on which the duty has been paid. In the show cause notice a demand of Rs. 9,53,88,001.00 was demanded on account of clandestine removal of the goods and on (sic) demand of Rs. 10,88,498 was demanded on account of under-valuation of the goods cleared by M/s. Prince Gutka Ltd. The Commissioner of Central Excise vide impugned order dropped the demand of Rs. 9,41,16,824 out of total demand of Rs. 9,53,88.001.00 and only confirmed the demand of duty of Rs. 12,71,177 in respect of clandestine removal and on account of under-valuation, a demand of Rs. 10,88,498 was confirmed. The Adjudicating authority also imposed personal penalties. M/s. Prince Gutka Ltd. and others filed appeals whereby the demand was confirmed and penalties were imposed, whereas the Revenue filed appeal against the Adjudication order whereby the demand of duty was dropped.

3. During the search of premises of M/s. Prince Gutka Ltd. and premises of M/s. H.H. Traders (P) Ltd. who is the distributor of goods manufactured by M/s. Prince Gutka Ltd., the Revenue Officers from the search of residential premises of S.P. Sharma, Director of M/s. H.H. Traders (P) Ltd. recovered certain documents such as Appraisal Report prepared by the income Tax Department. It was found that Income Tax Department searched the premises of the appellants on 19.8.93 and recovered certain records, which indicates that M/s. Prince Gutka Ltd. has indulged in large-scale evasion of duty also. The Revenue authorities obtained the copies of record seized by the Income Tax Department. The Revenue authorities also during the investigations from Shri S.P. Sharma, Director of M/s. H.H. Traders who is in his statement admitted the recovery of the documents prepared by Income Tax Department and admitted that they were purchasing Pan Masala Gutka Scented Supari etc. from M/s. Prince Gutka. The investigation conducted on the basis of the record recovered from the dealer i.e. M/s. H.H. Traders (P) Ltd. shows that M/s. Prince Gutka Ltd. was clearing Pan Masala and Pan Masala Gutka without payment of duty from their factory and by suppressing the value of products to evade duty. The contention is that the only evidence in support of demand is the statement of dealers.

4. The contention of the appellants is that all the documents relied upon by the Revenue is recovered from the residential premises of Director of M/s. H.H. Traders (P) Ltd. and no such record was recovered from the premises of the manufacturer. Some records were in abbreviations form and Shri S.P. Sharma, from whose possession the record was recovered, during his cross-examination, explained abbreviations, mentioned in the private record to the affect that these are in respect of Prince Supari, Black Scented Supari, Yamu Supari etc. which are not excisable goods. The contention is that Prince Gutka was also manufacturing Scented Supari etc. and the same was cleared M/s. H.H. Traders (P) Ltd.

5. The contention of the appellants is also that no investigation was conducted from the manufacturing Unit i.e. M/s. Prince Gutka Ltd. no statement was recorded nor they were confronted with the records recovered from the dealers premises. In respect of the under-valuation, the contention of the appellants is that the Adjudication authority in the impugned order had not given any finding in this regard nor any evidence is discussed in the impugned order while confirming the demand, hence the demand is unsustainable.

6. In respect of the confirmation of the demand of Rs. 12,71,177 the contention of the appellants is that there is no finding in the impugned order regarding this demand. The adjudicating authority on the one hand accepted the version given in the Cross-examination and on the other hand confirmed the same portion of demand without any evidence.

7. The learned Advocate contended that there is no room for assumption and presumption in cases of clandestine removal as held in the case of Quality Export & Chemicals v. CCE, 2004 (140) ELT 362 (All) and Grauer & Weil (India) Ltd. v. CCE, : 2000 (116) ELT 618, that the standard of proof in cases of clandestine removal is proof beyond doubt and not that of preponderance of probabilities as held in CCE v. Universal Polythelene Industries, 2001 (74) ECC 444 (T) : : 2001 (130) ELT 228 and Sharma Chemicals v. CCE, Calcutta-II, : 2001 (130) ELT 271 (Tri) ; that positive evidence is necessary to sustain a charge of clandestine removal as held in Grander & Weil (India) case, supra. He also mentioned that it has been held by the Tribunal in the case of CCE, Calcutta II v. Tube Bend (Cal) Pvt. Ltd., 2002 (136) ELT 839 (Tri) that "the charges of clandestine removal are required to be proved beyond doubt by production of evidence and cannot be based upon comparison of entries made in the Khatta and the RGI register"; that entries in private records cannot be held to establish clandestine removal without corroborative evidence; that; in the case of CCE, Chandigarh v. Laxmi Engineering Works, : 2001 (134) ELT811 (T), when the charge of clandestine removal was made on the basis of some slips recovered from the Assessees premises, it has been held by the Tribunal that the duty liability cannot be fastened on them as "there is nothing on record to suggest if any corroborative evidence in the form of receipt of raw materials or sale of the electric fans in a clandestine manner to different buyers by the respondents, was collected during the investigations". Reliance has also been placed on the following decisions:

(i) Sobu Plastics Pvt. Ltd. v. CCE, Jaipur, : 2002 (139) ELT 562 (Tri).

(ii) CCE Meerut v. Raman Ispat (P) Ltd., 2000 (129) ELT 46 (Tri)

(iii) Sharma Chemicals v. CCE, Kolkata II, : 2001 (130) ELT 271 (Tri)

wherein it has been held that entries in a private note book "as the most, it may raise a doubt but that cannot take the place of proof -- but the charge of clandestine removal cannot be sustained on such suspicion".

(iv) Gurpreet Rubber Industries v. CCE, Chandigarh, : 1996 (82) ELT 347 (Tri)

(v) Rama Shyma Papers Ltd. v. CCE, Lucknow, 2004 (95) ECC 86 (T) : : 2004 (168) ELT 494 (Tri)

(vi) Madhu Aluminium v. CCE, Indore, 2003 (54) RLT 296 (Tri)

(vii) Ess Vee Polymers (P) Ltd. v. CCE, 2004 (93) ECC 305 (Tri)

(viii) Gyan Mehtani v. State of Maharashtra, 1999 (110) ELT 400 (SC)

The Apex Court has held that "according to the system of jurisprudence which we follow, conviction cannot be based on suspicion nor on the conscience of the Court being morally satisfied about the complicity of an accused person. He can be convicted and sentenced only if the prosecution proves its case beyond all reasonable doubt."

8. The contention of the Revenue is that when the Director of M/s. H.H. Traders (P) Ltd. admitted during the investigation that they were receiving excisable goods from M/s. Prince Gutka Ltd. and reiterate the finding of the adjudication order.

9. We find that to prove the charge of clandestine removal, the Revenue is relying upon the abbreviations used in record recovered in possession of Shri S.P. Sharma, the distributor of the goods supplied M/s. Prince Gutka Ltd. M/s. Prince Gutka Ltd. are manufacturing Prince Gutka as well as Yamu Pan Masala and were also manufacturing Scented Supari and Prince Supari etc. Shri S.P. Sharma was cross examined by the appellant and during the cross-examination he submitted that earlier statement recorded by the Revenue officers whereby he submitted that abbreviations are in respect of the excisable goods was not voluntary statement and in fact these abbreviations are for the goods received by them from M/s. Prince Gutka Ltd. which are not excisable. His explanation to the abbreviations is reproduced in para 17.13, in the Adjudication order where by it was mentioned that abbreviation P is for Prince Supari, B is for Black Scented Supari and Y is for Yamu Supari etc. The Adjudicating authority noticed the fact that for the period 1.10.92 to 7.10.92, a separate demand was raised by taking into consideration the abbreviations as explained by Shri S.P. Sharma was dropped by the Collector of Central Excise vide order dated 27.7.94 and the appeal against the adjudication order was dismissed by the CEGAT vide order dated 7.3.1997.

10. We also find that no investigation was conducted in respect of the documents recovered from the dealers premises from the manufacturer M/s. Prince Gutka Ltd. The only evidence relied upon by the Revenue in support of their demand in the appeal filed by the Revenue is the statement of Shri S.P. Sharma and the time of Cross-examination deposed in favour of the manufacturer i.e. M/s. Prince Gutka Ltd.. We find that during the Cross-examination Shri S.P. Singh admitted the fact that Firm is dealing with the goods manufactured by M/s. Prince Gutka Ltd.. During his Cross-examination he also admitted that entires in abbreviations are in respect of the Scented Supari etc. and are not in respect of Gutka or Pan Masala. No suggestion was put by the Revenue regarding his explanation in favour of the manufacturing Firm. Further, we find that for the earlier period, the explanation given in the Cross-Examination was accepted by the Adjudicating authority and proceedings were dropped against which the appeal filed by the Revenue was dismissed by the Tribunal. In this situation, finding in respect of the statements of the dealer Shri S.P. Sharma attained finality. Therefore, the case of the Revenue demanding duty on the statement of Shri S.P. Sharma is without any merit.

11. Further, we find that in case law relied upon by the appellant it is settled position of law that the charge of clandestine removal, cannot be sustained on suspicion and entries in a private record at the most raise a doubt but do not prove the charge of clandestine manufacture and removal in absence of other corroborative evidence like installed capacity, raw material utilization etc. In the present case no investigation was conducted from the manufacturing unit. Hence, demand of duty on the basis of investigation conducted at the dealers side and where the dealer also not supported the case of revenue, the demand is not sustainable.

12. In respect of the demand confirmed on the basis of under-valuation, we find that Adjudication authority has not recorded any finding nor discussed any evidence in support of the confirmation of demand. Further, we find that the adjudicating authority also imposed personal penalties without recording any finding regarding omission or commission on the part of the appellants No. 2 to 6 in evasion of Central Excise duty. In these circumstances, the appeals filed by M/s. Prince Gutka Ltd. and Others were allowed after setting aside the demand and penalties and appeal filed by the Revenue is dismissed.