Archana Wadhwa, Member (J)

1. The Commissioner vide the impugned Order dated 26-4-1999 has confirmed a demand of duty of Rs. 17,58,084.00 in respect of Banphool Perfumed Hair Oil manufactured by the appellants on the finding that during the period from 15-11-1997 to 31-7-1998, the appellants had indulged in clandestine manufacture and removal of the said goods, thus evading the said duty. An amount of duty of Rs. 7,258.00 has also been confirmed in respect of the goods found short during the joint stock-taking conducted on 31-7-1998 at the time of visit of the Officers. Penalty of an equivalent amount has been imposed under the provisions of Section 11AC of the Central Excise Act, 1944. The appellants have, further, been directed to pay interest on the aforesaid demand under 11AB of the said Act.

2. The above Order has been passed by the Commissioner based upon the entries made in two small note-books recovered from one Shri Subhash Singh during the course of visit of the Officers in the appellants factory on 31-7-1998. The appellant firm has taken a stand before the Commissioner that said Shri Subhash Singh was not a worker in their factory and as such, the note-books recovered from his possession are not relatable to them. They have also made a request for cross-examining said Shri Subhash Singh, which request was turned down by the adjudicating authority by observing that there was no justification for allowing the cross-examination. The appellants through their Advocate, Dr. Samir Chakraborty, have made a grievance of the said refusal by the adjudicating authority, by terming the said refusal as wholly erroneous, arbitrary, unreasonable, perverse and untenable. It has been argued that the action of the Commissioner in refusing the cross-examination of said Shri Subhash Singh whose alleged statement and purported hand-books allegedly recovered from him, formed the very basis of the findings of the Commissioner, is a gross violation of principles of natural justice and fair play and has thereby vitiated the said Order and has rendered the same illegal, invalid, null and void. The appellants have relied upon the following decisions :

(i) P.S. Bedi & Co. v. Collector of Customs, 1993 (68) E.L.T. 363 (T);

(ii) Karri Vir Mehta v. Collector of Customs, 1998 (97) E.L.T. 42 (Ker.);

(iii) Senthil Kumar Soap Works v. Commissioner of Central Excise, 1997 (89) E.L.T. 77 (T).

3. Dr. Samir Chakraborty, learned Advocate for the appellants has, further, argued that the appellants had categorically disputed the factum, validity and /or correctness of the purported note-books said to have been recovered from Shri Subhash Singh. He submitted that during the course of adjudication, they had produced a list of workers of their factory furnished by the appellants, based upon their statutory records, which list has been summarily rejected by the Commissioner, by observing that the same was no evidence. He also submitted that an enquiry into the statutory records would have clearly established the correctness of the said list of workers and the fact that said Subhash Singh was never an employee or worker of the appellant company. He, further, submitted that had the Commissioner expressed his doubt prior to the passing of the impugned Order, they would have produced the statutory records before the adjudicating authority, establishing the correctness of the list of workers submitted by them. In any case, there is no document and nothing has been disclosed showing that said Shri Subhash Singh was working in the factory of the appellant company. Therefore, he submitted that the impugned Order passed by the Commissioner is not based upon any evidence, and is liable to be set aside on the said ground itself.

4. Dr. Samir Chakraborty, learned Advocate has further argued that the entries made in the note-books recovered from said Shri Subhash Singh cannot be made the evidence for arriving at a finding of clandestine manufacture and removal of their goods. There is no evidence to corroborate the allegation of clandestine manufacture and clearance and it is a settled law that the onus to prove so, is upon the Revenue and is required to be discharged by production of affirmative tangible evidence. In support of his above submission, he makes a reference to the following decisions :

(i) Kashmir Vanaspati (P) Ltd. v. CCE reported in 1989 (39) E.L.T. 655 (Tri.);

(ii) Hindusthan Lever Ltd. v. CCE reported in 1996 (87) E.L.T. 385 (Tri.);

(iii) Shakti Chemical Industries v. CCE reported in 1995 (76) E.L.T. 410 (Tri.).

5. He also drew our attention to that portion of the impugned Order where the Commissioner relied upon the statements of Shri Rajib Mukherjee and Shri A.K. Pandey. He submitted that both the statements were retracted by the said persons immediately thereafter, and no reasons have been given by the adjudicating authority as to why the said retracted statements should be relied upon for arriving at a finding based on the statement of the appellants. In any case, he submitted that there is nothing in the said statement to reflect upon the appellants clandestine activities.

6. In view of the foregoing, he prayed for setting aside the impugned Order along with the penalty of 100% of the alleged duty amount, imposed upon the appellants and the interest amount.

7. Shri V.K. Chaturvedi, learned SDR for the Revenue has reiterated the findings of the adjudicating authority. It has been argued that apart from the above note-books, statements of other persons were also there, which corroborate the factum of manufacture and removal of the goods in question, without payment of duty.

8. We have considered the submissions made from both sides. The appellants submissions made before the adjudicating authority have been summarised by the Commissioner in the following paragraph :

"The crux of the argument is that the said Shri Subhas Singh from whom two small Note Books alleged to have been recovered was not in-charge of M/s. Sharma Chemicals at Darsa Road, Baltikuri, Bakultala, Howrah factory. Shri Singh was never a worker in the factory not to speak of factory in-charge. They have furnished a list of the factory workers employed in the factory which would reveal that there were only 10 workers in the factory and Shri Subhas Singhs name is not there. Thus, the said Mr. Singh had never been even a worker of Sharma Chemicals. They have, therefore, strongly disowned two note books said to have been recovered from Shri Subhas Singh and his statement implicating the partners and their firm. They have stated that they are surprised to find that the entire allegations are based on the said two note books and the statement of Shri Subhas Singh without corroborating the same by any other evidence."

9. While dealing, with the above defence of the appellants, the Commissioner observes as under : -

"I find that the allegations of evasion of duty by way of suppression of production and clandestine removal of the same without payment of Central Excise duty are mainly based on two note books recovered from Shri Subhas Singh in which there were entries of production and removal of the alleged products manufactured by the assessee which were not found to have been recorded by the assessee in their statutory record. The assessees argument denying the said two note books and the entity of Shri Subhas Singh as in-charge and worker of the assessees company is not convincing or plausible. Their argument has apparently been adduced only to absolve their responsibilities and/or their offences as to the suppression of production and clandestine removal of the same without payment of duty which have been brought on surface through the said two note books recovered from the said Mr. Singh. In view of the said denial of entity of Shri Singh as a worker of the company, the obvious question arises as to how the detailed particulars of production and clearance of the alleged product of the said assessees factory were available in the said two note books recovered from Shri Singh when he is not at all a worker of the noticees company. I am, therefore, of the conclusive view that Shri Singh was very much concerned with the said company and he was instrumental to such activities of the company as to the accountal of production and removal of the alleged product without payment of duty on private record against which there will be no entry in the statutory Central Excise records. The list of workers, furnished in which Shri Singhs name is not there will have no evidentiary value since the same is not a vital record to accept that Mr. Singh is not a worker of the assessees company. It is also a modus operandi that the person who has been engaged by the assessee to keep such an account of unaccounted production and removal has not been listed as a worker of the company. In view of the fact that a clear-cut picture of the company of unaccounted production and removal for the alleged product of the company was available in the said two note books which was duly supported by a statement given by Shri Singh voluntarily accepting the said entries, no further corroborating evidence was necessary to bring the allegation against assessee."

10. A reading of the above paragraph shows that the list of workers furnished by the appellants have been dismissed summarily by the adjudicating authority by observing that the same is not a vital record to accept that Shri Singh was not a worker of the appellant firm. We fail to appreciate the above observation of the adjudicating authority. If the list of workers based upon the statutory records required to be maintained by the appellants, does not reflect the correct position, we fail to understand what would do so Further, the Commissioners observation that usually, the persons entrusted with the job of clandestine manufacture and removal, are not shown as employees, is in the arena of assumption and presumption and cannot be sustained.

11. As regards the appellants request to cross-examine said Shri Singh, the Commissioner observed as under : -

"I have already discussed about the said documents which were incriminating in nature and how it was recovered from Shri Singh and what was the content of the said documents. It has been clearly discussed above that the said documents contained entries of production and clandestine removal of the alleged goods manufactured by the assessee and they were recovered from Shri Singh who admitted the fact in his statement given voluntarily and that Shri Singh was instrumental to all such activities of evasion of Central Excise duty which took place in the assessees factory. In view of the said circumstances, I did not find any justification to allow the assessee to cross-examine Shri Singh. Therefore, cross-examination of Shri Singh was not allowed since Shri Singh was very much concerned with the activities of the said assessee and he was definitely a worker of the said assessee. The assessee is found to have attempted to extract a different reply from Mr. Singh through the process of cross-examination since he has some obligation to his employer."

12. We do not appreciate the above reasoning of the adjudicating authority for rejecting the request for cross-examination of Shri Singh. When the appellant firm has taken a definite stand that Shri Singh was not their employee, for which purpose they had also produced a list of workers before the adjudicating authority; the truth and veracity of the stand taken by the appellants could only be examined by allowing Shri Singh to be cross-examined by the appellants. The apprehension of the adjudicating authority that the assessee is found to have attempted to extract a different reply from Shri Singh through the process of cross-examination, is based upon his predetermination of the fact that Shri Singh is an employee of the appellants and he is predicting the result of the cross-examination. We are of the firm view that by denying the request of cross-examination of Shri Singh, the adjudicating authority has violated the principles of natural justice, especially when the entire case of the Revenue was based upon the note-books recovered from Shri Singh, and of the appellants was based upon their denial of Shri Singh being their employee.

13. We also agree with the learned Advocate that for establishing the factum of clandestine manufacture, the Revenue is required to establish the guilt beyond doubt. The entries in the note-books recovered from Shri Singh who have been denied by the appellants to be their employee, can at the most, create a doubt against the appellants, but cannot take the place of legal evidence so as to establish the charge against them. Accordingly, we feel that the impugned Order confirming the demand of duty against the appellants and imposing penalty upon them is not sustainable.

14. Before we part, we would like to discuss some of the relevant case laws on the point. In the case of Gurpreet Rubber Industries v. Collector of Central Excise reported in 1996 (12) RLT 569, the Tribunal has set aside the demand of duty based upon the entries in a private note-book (diary) of an honourary worker in the appellant firm holding that except the said diary, there was no other evidence such as installed capacity of the factory, raw materials, utilisation, labour employed, power consumed, goods actually manufactured and packed etc., to prove the alleged clandestine production of the goods and removal of the same from the factory. Subsequently, the Tribunal in the case of Kothari Products v. C.C. Ex. reported in 1999 (31) RLT 67, observed that it cannot be concluded that the note-book is an authenticated private record of production so as to raise a demand based on the figures indicated therein. At the most, it may raise a doubt, but that cannot take the place of proof. Even though there may be certain element of truth in the prosecution story, but between may be true and must be true, there is a long distance to travel and the whole of the distance must be covered by a legal and unimpeachable evidence before a person can be convicted. Similarly, we find that in the case of Biria Tyres reported in 1999 (33) RLT 52, demands of duties raised solely on the entries made in the Curing Register, were held not to be sustainable in the absence of independent evidence corroborating the same. Further, in the case of C.C. Ex. v. Mint Steel Mills reported in 1999 (112) E.L.T. 934, it was observed that some entries made in the private note-book seized from the factory premises tallying with the entries in RG-I, may raise suspicion that those entries in the note-book relate to the goods clandestinely removed in the past without payment of duty, but the charge of clandestine removal cannot be sustained on such suspicion.

As in the instant case, apart from the fact that the appellants have denied Shri Singh to be their employee, we also find that the Revenues case is entirely based upon the entries made in the note-book recovered from the possession of Shri Singh. There is no other evidence corroborating the charge of clandestine manufacture and removal. As such, applying the ratio of the above decisions, the demand against the appellants cannot be sustained.

15. As a result of the foregoing, we set aside the impugned Order and allow the appeal with consequential relief to the appellants.