Rakesh Kumar, Member (T)

1.The facts leading to these appeals are, in brief, as under :-

1.1 M/s. Shyam Traders, 255/62, Kundri, Rakabganj, Lucknow (U.P.) (hereinafter referred to as M/s. ST) is a proprietary concern of Shri Sanjiv Mishra and is a manufacturer of "Shyam Bahar" brand of Gutka, chargeable to central excise duty. The ingredients of Gutka are ground supari (about 80% to 85%) and kattha, lime, tobacco, menthol and perfume. Gutka is sold in retail packs of laminated plastic with manufacturers brand name, quantity of gutka contained, MRP etc. printed on it. M/s. ST, during the period of dispute were manufacturing 2 gms. Gutka pouches. Sixty to Sixty Six of such pouches are further packed in a bigger plastic bag called PP outer. During the period of dispute, the suppliers of plastic lamination and other packing material were M/s. MG laminations, Kanpur; M/s. Bakul Polypacks Pvt. Ltd., Kanpur and M/s. Anukampa Poly Packaging Industries, Lucknow. While till November, 2002, cutting and roasting of supari was being done in the factory of M/s. ST, since December, 2002, a firm M/s. Dhirendra Grinding at F-12, Talkatora Industrial Area, Lucknow (hereinafter referred to as "M/s. DG") with Shri Dhirendra Shukla as its proprietor, was started and M/s. DG started roasting and cutting the supari for M/s. ST on job work basis in their factory at "F-12, Talkatora, Industrial Area, Lucknow".

1.2 It is in the case of the department that on 20-10-2003, on receipt of intelligence that M/s. ST are engaged in large scale of evasion of duty by adopting various modus operandi, the officers of Directorate General of Central Excise Intelligence (DGCEI) conducted simultaneous search of-

(a) the factory-cum-residential premises of Shri Sanjiv Mishra, Proprietor of M/s. ST,

(b) factory premises of M/s. DG;

(c) premises of transporters, M/s. Sitapur Kanpur Transport Company [M/s. SKTC] at Lucknow & Sitapur, M/s. Hazi Transport Goods Carrier, Lucknow [M/s. HTGC] and M/s. Narayana Transport Freight Carriers, Lucknow [M/s. NTFC];

(d) premises of plastic lamination and other packaging materials suppliers - M/s. MG Laminators; M/s. Bakul Polypacks and M/s. Anukampa Poly Packaging; and

(e) premises of customer-dealers of M/s. ST - M/s. Shashi Traders, Lucknow; M/s. Shiv Kumar Jaiswal & M/s. Chokhram Mahinder Kumar of Sitapur; Shri Pawan Grover of Shahjahanpur, M/s. Awasthi Zarda Store, Station Road, Hardoi and M/s. Shanker Traders, Lakhimpur, Kheri.

1.2.1 There was resistance by Shri Sanjiv Mishra and his family members to the search of the premises of M/s. ST, which was completed with the help of police. In course of search of the premises of M/s. ST, while from the residential portion, cash of Rs, 4,38,80,530/- was recovered for which Shri Sanjiv Mishra, at that time, could not give any explanation, in the factory premises, 85008 pouches of 2 gms. Shyam Bahar Gutka, not accounted in RG-1 register, 1020 kgs. of raw supari for which no account was being maintained, 1200 kg. excess stock of roasted supari (processed) and about 67 kgs. Excess stock of Elaichi was found. The cash as well as the unaccounted excess finished goods and raw materials were placed under seizure. In the premises of M/s. DG at F-12, Tal Katora, Lucknow, 15780 kgs. of kachchi supari, 2300 kgs. of cut supari (prepared), 720 kgs. of kharab supari (return) and 24160 kgs. of supari dust/ Burada & chhilka was recovered which were placed under seizure, as no account was being maintained in respect of the same.

1.2.2 During search of the office premises of M/s. SKTC at Lucknow and Sitapur, 40 boras and 5 boras respectively of Shyam Bahar Gutka were recovered which did not appear to be covered by any valid invoice and hence the same were seized. Beside this, the booking registers, which appeared to be containing the details of booking of Shyam Bahar Gutka by M/s. ST were also resumed. From the premises of M/s. NTFC at Lucknow, 20 bilty (GRs) books which appeared to be containing the details of the consignments of Gutka booked by M/s. ST were seized. From the premises of M/s. HTGC, Lucknow some GR books and challan books relevant to the investigation were seized.

1.2.1 In the premises of Dealers - M/s. Shashi Traders, Lucknow; M/s. Shiv Kumar Jaiswal, sitapur; M/s. Shanker Traders, Lakhimpur and M/s. Awasthi Zarda Store, Hardoi, certain quantity of Shyam Bahar Gutka pouches were recovered which did not appear to be covered by any invoice and, hence, the same were placed under seizure.

1.2.2 Total duty involved in respect of 974.55 kgs. of gutka cleared without any valid invoice and seized from the premises of Transport Companies and dealers was Rs. 1,46,185/-.

1.2.3 In the premises of M/s. Bakul Polypacks, 2737.75 kgs. of printed laminated film rolls meant for M/s. ST was found over and above the balance in the RG-I register and the same was placed under seizure.

1.3 Inquiry in respect of M/s. DG revealed the following :-

(a) This firm with Shri Dhirendra Shukla as proprietor had been started since December, 2002. Initially some machines for processing of supari had been put by Shri Sanjiv Mishra in the premises of M/s. DG, but subsequently all the machines for processing and cutting of supari were shifted from the factory of M/s. ST at Kundri, Rakabganj to F-12, Talkatora, Lucknow. They were processing supari mainly for M/s. ST. They and could process supari for others but only after completing the job work of M/s. ST.

(b) Electricity bills of M/s. DG were being paid by M/s. ST and the earning of M/s. DG for the job work for M/s. ST was even less than their electricity expenses.

(c) an employee of M/s. ST, Shri Raj Kumar Pahuja was maintaining the accounts of M/s. DG also.

(d) Shri Dhirendra Shukia in his statement dated 2-1-2004 stated that Shri Raj Kumar Pahuja is an employee of M/s. ST and is getting his salary from M/s. ST and that, "Kharab supari" (720 kg.), "Supari Burada" and "Chhilan" (24160 Kgs.) is the waste accumulated over a period of time and that the waste of supari is about 4%.

(e) While from the records of M/s. DG, it appeared that daily dispatch of processed supari to M/s. ST was 2000 to 3000 kgs., in the accounts of M/s. ST, receipt and consumption of only around 500 to 600 kgs. of prepared supari per day was being shown.

(f) Assuming the waste of Burada (22000 Kgs.) and Chhilan (720 kgs.) to be of period since Dec. 2002, which is 4% of the total quantity of supari processed, the total quantity of supari processed by M/s. DG from Dec. 2002 to 20-10-2003 since May, 2003 would be around 46500 kgs. Thus from the actual consumption of supari, it appeared that the actual production of Gutka by M/s. ST was much more than what was being shown.

1.4 Samples were drawn from the gutka pouches seized from the factory premises of M/s. ST and from the premises of M/s. SKTC on 20-10-2003 and the same were sent for testing of its contents to Shri Ram Institute for Industrial Research, Delhi (SIIR). On test, the average content of laminated plastic packing in each 2 gm. gutka pouch, supari, tobacco, lime, kattha and menthol in a gutka pouch was found to be 0.4 gms. Per pouch, 85.4% to 87.5% by weight, 2.1 to 2.2 % by weight, 0.6% to 0.8% by weight, 2 to 2.1% by weight and 0.3% to 0.4% by weight respectively. However, during the period from 1-4-2000 to 16-10-2003, the consumption of tobacco shown in the records is 13.7% to 16% which appeared to be based on the formula for Shyam Bahar Gutka, declared by M/s. ST to Department under their letters dated 28-9-2000 & 1-10-2000. On the basis of the tobacco consumption shown and taking actual tobacco content as 2.2%, the gutka manufactured during 2000-2001, 2001-2002, 2002-2003 and 1-4-2003 to 16-10-2003 would be 861931.818 kg., 1011838 kgs., 1325890.12 kgs. and 762878.25 kgs. respectively as against the production of 127944 kgs. 139383.72 kgs., 181334.75 kgs. and 1,22,211.9 kgs. respectively shown by M/s. ST during these periods. This indicated that production of Gutka had been grossly under-reported by M/s. ST during 1-4-2000 to 16-10-2003 by showing inflated consumption of tobacco.

1.5 Sixty to sixty two grams gutka pouches are further packed in a plastic bag called PP outer. The pack of 60 to 66 pouches is also called a bundle. The sales invoice to dealers are issued in terms of bundles. Till July, 2002, PP outer were being supplied by M/s. Anukampa Poly Packaging Industries, Lucknow (M/s.APPL). The quantity of PP Outer supplied by M/s. APPL to M/s. ST during October, 2001 to July, 2002 as per the records of M/s. APPL is 14789.3 kgs. (41,08,135 in number). The 41,08/135 PP outer received by M/s. ST from M/s. APPL were used by M/s. ST upto November 2002, as thereafter they started procuring this item from M/s. Bakul Polypack, Kanpur. The use of 41,08,135 PP outer in packing of gutka during October, 2001 to November, 2002 period would indicate production of 4108135 X 60 X 2 gm. i.e. 4,92,976 kgs. of gutka while the production of gutka recorded by M/s. ST during this period is 199020.876 kgs.

1.5.1 In the factory premises of M/s. ST there were 19 packing sealing machines installed. As per the statement of Shri Awadhesh Agnihotri, Manager, M/s. ST, the production capacity of each machine was 60 to 70 pouches per minute and according to him, the factory used to work on all days except Holi, 15th August, 26th January, etc. holidays, and that whenever he visited the factory, he found the factory to be working, which would indicate working of the factory round the clock. If the factory works three shifts for 30 days in a month, the production capacity per month would be 19 X 60 x 60 X 24 x 2 X 30 i.e. 98496 kgs. The production of gutka being recorded by M/s. ST every month in their records was much less.

1.6 On inquiry with the transporters - M/s. SKTC, M/s. HTGC and M/s. NTFC, it was revealed by their employees /partners that all the consignments mentioned in their GR register as "Zarda", "Masala", "Shyam Bahar", etc. are of Shyam Bahar Gutka, that the goods came from the factory of M/s. ST at Kundri, Rakabganj, Lucknow, that the payment for transport charges was being received in cash mostly from M/s. ST and sometimes from consignees and that sometimes, the gutka consignments were received for transport under invoices, sometimes without invoices and sometimes under old invoices. It was also found that the consignments of Gutka were booked through these transport companies showing buyers names as consignor as well as consignee and in a number of cases, such buyers names appeared to be fictitious. Shri Awadesh Agnihotri, Manager of M/s. ST in his statements dated 16-1-2004 and 27-2-2004 also confirmed that on instructions from the buyers the consignments of Gutka were being sent to the above mentioned three transport companies by Thelas.

1.7 Inquiry was made with the Dealers buying gutka from M/s. ST -Shri Shiv Kumar Jaiswal, Proprietor, M/s. Jaiswal Stores, Sitapur; Shri Mahesh Chand Chaurasia, Proprietor of M/s. Shanker Traders, Lakhimpur Kheri; Shri Suresh Chand Chaurasia, Proprietor of M/s. Suresh Chand Mahesh Chand; Shri Ajay Sehgal of M/s. Hans Raj Sehgal, Hardoi and Shri Pawan Kumar Grover, Proprietor of M/s. Grover Trading Company, Shahjahanpur, who confirmed having purchased Shyam Bahar brand Gutka from M/s. ST, Lucknow, the payment for which was being made in cash. Shri Ajay Sehgal in his statement also stated that though his name or alias is not "Bunti", Shri Sanjiv Mishra and Shri Awadesh Agnihotri of M/s. ST had told him for taking delivery of the goods in the name of "Bunti" and that he used to destroy the papers received from M/s. ST after receipt of the goods. Other dealers also mentioned receiving consignments of Gutka from M/s. ST under various names.

1.8 From the above, it appears that the GR issued by M/s. SKTC, M/s. NTFC and M/s. HTGC regarding despatch of "Zarda", "Masala" or "Gutka" etc. pertained to Shyam bahar gutka booked by M/s. ST and a number of said GRs were either hot accompanied by any invoice or were accompanied by very old invoices not pertaining to the goods covered under the GRs, which indicated that the bulk of the quantity of gutka transported under these GRs had been cleared by M/s. ST without payment of duty. The gross under recording of production of gutka by M/s. ST as estimated on the basis of actual consumption of supari, tobacco and PP outers indicated huge clearance having been made without payment of duty. According to the department, during the period from 1-1-2001 to 19-10-2003, the difference between the quantity of Shyam Bahar brand Gutka pouches cleared on payment of duty to outstation buyers and the quantity of gutka pouches actually dispatched to outstation buyers as per the records of the transport companies (excluding the quantity of Gutka seized on 19-10-2003) was 453385.94 on which duty of Rs. 6,79,87,895/- was involved.

1.9 In course of inquiry, it was found that in some cases where the invoices had been issued, the quantity of the goods, on being checked by Commercial Tax Authorities was found to be 50% higher as while M/s. ST claimed that in one gunny bag (bora) 100 bundles of 60 to 66 two grams pouches are packed, the bags were found to be containing 150 bundles. On 20-10-2003, when the Shyam Bahar Gutka consignments were seized at the premises of transport companies or dealers and each bora was found to be containing 150 bundles of 60 to 66 pouches each. Shri Hari Prasad of M/s. SKTC, Lakhimpur Kheri; Shri Mithlesh Kumar of M/s. HTGC, Lucknow and Shri Abdulla Siddique, Proprietor, M/s. HTGC in their statements have stated that gross weight of one bora of Shyam Bahar Gutka was from 20 kgs. to 25 kgs. The gross weight of 20 kg. would correspondent to 150 bundles each of 60 to 66 two gms. Pounches of gutka (150 x 2 x 66 gms = 19.8 kgs.) The officers were, therefore, of the view that during 1-1-2001 to 19-10-2003, wherever the goods had been cleared by M/s. ST under invoices, duty had still been evaded by clearing 50% excess quantity. On this basis, it has been alleged that during 1-1-2001 to 19-10-2003 period, 24070 Kgs. of gutka involving duty of Rs. 35,80,500/- was cleared without payment of duty.

1.10 Thus, total duty evasion alleged for the period from 1-1-2001 to 19-10-2003 is Rs. 7,15,70,395/- (Rs. 6,79,89,895/- + Rs. 35,80,500/- + Rs. 1,46,185/-) on 478430.49 Kgs. of Gutka. Shri Sanjiv Mishra, Proprietor of M/s. ST in his statements dated 31-12-2003, 4-6-2004 and 11-6-2004 could not give any satisfactory explanation about the above allegation.

1.11 The investigating officers made inquiries about the source of cash of Rs. 4,38,80,530/- recovered from the residential premises of Shri Sanjiv Mishra on 20-10-2003. While at the time of recovery, Shri Mishra could not give any explanation whatsoever and the cash book of M/s. ST seized on 20-10-2003 did not reflect the cash seized, subsequently he claimed that he had promoted a company M/s. Shyam Vanaspati Oil Ltd. (SVOL) for manufacture of vanaspati of which he himself and Shri Pratyoosh Mishra were the Directors and on the basis of certificate issued by one Shir V.K. Tulsian, Chartered Accountant, claimed that the cash of Rs. 4,38,80,530/- seized was the share application money received from investors, an amount of Rs. 4.05 crore of which had been received from three companies M/s. Betsy Growth Finance Ltd., M/s. Sunshine Capital Ltd. and M/s. Stellar Investment Ltd. all of Delhi. Inquiry revealed that Sh. Surinder Jain and his brother, Shri Virender Jain were behind these three companies -M/s. Betsy Growth, M/s. Sunshine Capital and M/s. Stellar Investment and Sh. Surinder Jain in his statement dated 11-5-2004 and Shri Virender Jain in his statement dated 13-5-2004 stated that bogus/ fictitious entries had been made in the books of accounts of M/s. Stellar Investment, M/s. Betsy Growth and M/s. Sunshine Capital to show investment in cash towards share application in SVOL while in fact no money had been paid to M/s. SVOL. In view of this, the claim made by Shri V.K. Tulsian, Chartered Accountant of M/s. SVOL that the cash recovered from the residential premises of M/s. ST on 20-10-2003 was the share application money received by M/s. SVOL from investors appeared to be false and the cash seized appeared to be the sale proceeds of gutka cleared clandestinely by M/s. ST without payment of duty. Though M/s. ST filed a civil writ petition before Honble Allahabad High Court against seizure of currency, the same had been dismissed.

1.12 On the basis of the above investigation, a show cause notice dated 14-10-2004 was issued to M/s. ST and other noticees for -

(a) recovery from M/s. ST of duty amounting to Rs. 7/17,16,580/- on 478430.49 kgs. of Shyam bahar gutka in the 2 gms. pouches alleged to have been cleared during 1-1-2001 to 19-10-2003 period without payment of duty, under the proviso to Section 11A(1) of the Central Excise Act, 1944, alongwith interest on this duty under Section 11AB ibid and appropriation of an amount of Rs. 55,60,612/- already deposited towards the demand;

(b) imposition of penalty on M/s. ST under Section 11AC ibid for alleged duty evasion of Rs. 7,17,16,580/-;

(c) Confiscation of currency of Rs. 4,38,80,530/- seized from the factory cum residential premises of M/s. ST on 20-10-2003 under Section 121 of Customs Act, 1962 as made applicable to Central Excise cases by Notification No. 68/63-C.E., dated 4-5-1963 issued under Section 12 of the Central Excise Act, 1944;

(d) Confiscation under Rule 25(1) of Central Excise Rules, 2002 of

(i) 85008 pouches of Shyam bahar Gutka seized from the factory premises of M/s. ST and of 45 bags containing 4,45,500 pouches of Shyam Bahar Gutka seized from M/s. SKTC, Lucknow & Sitapur;

(ii) 3 bags containing 28050 pouches, 3828 pouches and one bag containing 9900 pouches of Shyam bahar gutka seized from the shop premises of M/s. Jaiswal Store, Sitapur, M/s. Shashi Traders, Lucknow and M/s. Shankar Traders, Lakhimpur, Kheri, respectively and imposition of penalty on M/s. ST for contravention of various provisions of Central Excise Rules;

(e) Confiscation of supari and supari waste seized from the premises of M/s. DG at F-12, Talkatora, Lucknow under Rule 25 of Central Excise Rules, 2002;

(f) Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on-

(i) The transporters M/s. SKTC, M/s. NTFC and M/s. HTGC;

(ii) The dealers - buyers of M/s. ST M/s. Jaiswal Stores, Sitapur; M/s. Shashi Traders, Lucknow; M/s. Shankar Traders, Lakhimpur Kheri; M/s. Suresh Chand Mahesh Chand, Lakhimpur Kheri and M/s. Chokh Ram Mahender Kumar, Sitapur;

(iii) Shri Sanjiv Mishra, Prop, of M/s. ST; and

(iv) M/s. SVOL, Shri Sanjiv Mishra and Sh. Pratyoosh Mishra, Director of M/s. SVOL, Sh. Surender Jain, Director M/s. Sunshine Capital Ltd. and M/s. Betsy Growth and Sh. Virender Jain, Director, M/s. Stellar Investment; and

(g) Imposition of penalty under Rule 27 of the Central Excise Rules on

(i) M/s. Bakul Polypack, Kanpur; and

(ii) Dhirendra Shukla, Prop. M/s. DG, F-12, Talkatora, Lucknow.

1.13 The above show cause notice was adjudicated by Commissioner, Central Excise, Lucknow vide order-in-original No. 10/Comm/LKO/2006-07 dated 23-3-2007, by which -

(a) duty demand of Rs. 7,17,16,580/- was confirmed against M/s. ST along with interest and an amount of Rs. 55,60,612/- already deposited was appropriated;

(b) penalty of Rs. 7,17,16,580/- was imposed on M/s. ST under Section 11AC ibid.

(c) Indian currency of Rs. 4,38,80,530/- seized from the premises of M/s. ST was confiscated under Section 121 of the Customs Act, 1962 read with Notification No. 68/63-C.E., dated 4-5-2003 issued under Section 12 of the Central Excise Act, 1944;

(d) Supari seized from the premises of M/s. DG was confiscated under Rule 25 of the Central Excise Rule, 2002 and an amount of Rs. 4,80,000/- paid for provisional release was appropriated towards the value of the goods and a penalty of Rs. 10000/- was imposed on M/s. ST.

(e) 85008 pouches of Shyam bahar gutka seized from the premises of M/s. ST were ordered to be confiscated under Rule 25(1)(b) with option to be redeemed on fine of Rs. 21252/- and penalty of Rs. 25502/- was imposed on M/s. ST under Rule 25;

(f) Shyam bahar gutka pouches seized from the premises of transport company and dealers were ordered to be confiscated under Rule 25 of the Central Excise Rule with option to be redeemed on payment of redemption fine;

(g) Penalty under Rule 26 of Central Excise Rules were imposed on the transporters and dealers as under :-

(i)

M/s. SKTC

Rs. 20 lakhs

(ii)

M/s. HTGC

Rs. 2 lakhs

(iii)

M/s. NTFC

Rs. 40000/-

(iv)

ShivkumarJaiswal

Rs. 10000/-

(v)

M/s. Shankar Traders

Rs. 10000/-

(vi)

M/s. Shashi Traders

Rs. 10000/-;

(h) Penalties under Rule 26 of the Central Excise Rules were imposed on other noticees as under :-

(i)

M/s. BakulPolypack

Rs. 75 lakhs

(ii)

Shri Dhirender Shukla Proprietor, M/s. DG

Rs. 50 lakhs

(iii)

M/s. SVOL

Rs. 50 lakhs

(iv)

Sanjiv Director M/s. SVOL

Rs. 60 lakhs

(v)

Pratyoosh, Director M/s. SVOL

Rs. 60 lakhs

(vi)

Sh. V.K. Tulsian CA Authorised of M/s. SVOL

Rs. 50 lakhs

(vii)

Sh. Surender Jain, Director M/s. Sunshine Capital and M/s. Betsy Growth Finance

Rs. 50 lakhs

(viii)

Sh. Virender Jain, Director M/s. Stellar Investment

Rs. 50 lakhs

Penal proceedings against M/s. Chokh Ram Mahinder Kumar, Sitapur were dropped.

1.13 Against the above order of the Commissioner, these six appeals have been filed by M/s. ST, M/s. SKTC, Shri Dhirendra Shukla, M/s. SVOL and Shri Sanjiv Mishra & Pratyoosh Mishra, Directors of M/s. SVOL.

Heard both the sides.

1.1 Shri Bipin Garg, Advocate, the learned Counsel representing M/s. ST, M/s. SVOL, Shri Sanjiv Mishra, Proprietor of M/s. S.T. and Director of M/s. SVOL, Shri Pratyoosh Mishra, Director M/s. SVOL, and Shri Dhirendra Shukla, Proprietor, M/s. Dhirendra Grinders, pleaded that the entire case against M/s. ST and others is based on some details regarding booking of consignments in the records of three transport companies, M/s. SKTC, M/s. HTGC and M/s. NTFC, that all the sales of M/s. ST were at factory gate and the consignments in respect of which the duty is being demanded had been booked by the customers of M/s. ST to whom the goods had been sold by M/s. ST at the factory gate on payment of duty, that there is no evidence that the consignments declared to be of "Shyam Bahar" Zarda, Masala etc. whose details are mentioned in the GRs issued by the above mentioned transport companies had been booked by M/s. ST, that at the time of search of the factory premises of M/s. ST, except for excess stock of 85008 pouches Shyam Bahar Gutka, no other discrepancy in the account of raw materials had been detected, that as regards the cash of Rs. 4,38,80,530/- seized from the factory-cum-residential premises of Shri Sanjiv Mishra, the department cannot presume the same to be the sale proceeds of Shyam Bahar Gutka cleared without payment of duty and the burden is on the department to prove that the same was the sale proceeds of the goods cleared without payment of duty, that the cash seized, in fact, belongs to M/s. Shyam Vanaspati Oils Ltd., (SVOL), a company promoted by M/s. Sanjiv Mishra a few days before the date of search of the residential-cum-factory premises of M/s. ST and this money had been raised by M/s. SVOL from the investors, as certified by their Chartered Accountant, Shri V.K. Tulsiyan, that the name of M/s. S.T. does not figure anywhere in the challans and GRs issued by the transport companies or in the records maintained by them, that in view of this, the duty demand of Rs. 6.79 crores based on the documents recovered from the three transport companies is without any basis, that the GRs and challans issued by the transport companies mentioned the goods as "Zarda", "Masala" etc and not "Shyam Bahar Gutka" and hence, it cannot be presumed that the goods booked under those GRs/challans were Shyam Bahar Gutka manufactured by M/s. ST, that some GRs mention the goods as "Shyam Bahar" but this can not be assumed to be Shyam Bahar Gutka, as the brand name "Shyam Bahar" was also being used by M/s. Spatial Commercial Ltd., M/s. Satish Trading and M/s. SS Trading, as is clear from the copy of Civil Suit No. 28/03 filed by them against M/s. ST before District Judge, Kanpur in November 2003, that request of M/s. ST vide their letter dated 5-2-2006 for cross examination of 25 persons which included the Proprietors/partners and employees of transport companies, proprietors of dealer firms to whom gutka had been sold, Shri Dhirendra Shukla, Proprietor, M/s. DG, and Chemical Examiner of SIIR who had tested the sample of gutka pouches, but the same has not been allowed, that since the major portion of duty demand is based on the testimony of these persons, not permitting their cross-examination vitiates the entire proceedings and in this regard, he relies upon the judgment of Honble Allahabad High Court in case of C.C.E., Meerut-I v. Parmarth Iron Pvt. Ltd. reported in : 2010 (260) E.L.T. 514 (All.), that duty demand of Rs. 35,80,500/- is based on the allegation that during the period from 1-1-2001 to 20-10-2003, while the duty had been paid on the basis that each gunny bag (bora) contained 100 bundles of 60 to 66 two gram pouches each, actually each bag contained 150 such bundles, that during the above period, M/s. ST were packing 60 to 66 pouches in one bundle and only 100 such bundles were being packed in one bag (bora), that there is no basis for the departments allegation that each bora was containing 150 bundles of 60 to 66 pouches each, i.e. 9000 to 9900 pouches, that entire duty demand is based on the assumptions and presumptions, that no adverse conclusions can be drawn on the basis of recovery of cash of Rs. 4,38,80,530/- from the factory-cum-residential premises of Shri Sanjiv Mishra, that statement of the employees of the transport companies are not admissible as, as mentioned above, they had not been allowed to be cross-examined, that neither the currency of Rs. 4,38,80,530/- is liable for confiscation nor the duty demand of Rs. 7,17,16,580/- is sustainable against M/s. ST, that penalties of Rs. 50 Lakhs, Rs. 60 Lakhs and Rs. 60 Lakhs have been imposed on M/s. SVOL and its Director, Shri Sanjiv Mishra and Shri Pratyoosh Mishra, respectively under Rule 26 of the Central Excise Rules, 2002 for alleged abetment in duty evasion by M/s. ST, that this penalty is not sustainable, as even if the allegation regarding fabrication of the documents with regard to origin of the seized cash of Rs. 4,38,80,530/- by M/s. SVOL, Shri Sanjiv Mishra and Shri Pratyoosh Mishra is accepted, no penalty on the basis of the same can be imposed under Rule 26 of the Central Excise Rules, 2002, as during the period of dispute, no penalty could be imposed under Rule 26 for such activities, that there is no allegation that M/s. SVOL or its Directors, Shri Sanjiv Mishra and Shri Pratyoosh Mishra, during the period of dispute, were involved the acquiring possession of or being concerned in transportation, selling, purchasing or in any other manner dealing with any excisable goods, which they knew or had reason to believe were liable for confiscation under the provisions of Central Excise Rules, that in view of this, the penalty under Rule 26 on M/s. SVOL and its directors, Shri Sanjiv Mishra and Shri Pratyoosh Mishra is without any basis, that as regards penalty of Rs. 50 Lakhs on Shri Dhirender Shukla, proprietor of M/s. DG, the allegation against him is non-accountal of supari received from M/s. ST for processing, that neither there is any allegation that Shri Dhirendra Shukla dealt with any excisable goods in the manner mentioned in Rule 26 of the Central Excise Rules nor there is contravention of any provisions of Central Excise Rules in respect of seized supari and in view of this, the impugned order confiscating the supari seized from the premises of M/s. DG under Rule 25 and imposing penalty on Shri Dhirender Shukla under Rule 26 is without any basis.

1.2 Shri Amit Awasthi, Advocate, Id. Counsel representing M/s. SKTC, pleaded that penalty on a transporter can be imposed under Rule 26 of the Central Excise Rules only if there is evidence on record that the transporter had knowledge that the goods being transported by him were liable for confiscation under the provisions of Central Excise Act, 1944 or of the Rules made thereunder, that no evidence in this regard has been produced by the department showing that M/s. SKTC had knowledge that the goods transported by them had been cleared without payment of duty or that any other provisions of Central Excise Rules had been contravened in respect of the same and that in view of this, there is no justification for imposition of penalty on M/s. SKTC under Rule 26 of the Central Excise Rules.

1.3 Shri B.K. Singh, Id. Jt. CDR assisted by Shri S.R. Meena, Id. SDR defended the impugned order by reiterating the findings of the Commissioner in the impugned order and pleaded that M/s. ST were indulging in large scale of evasion of. duty by grossly under-reporting the production and clearances of Shyam Bahar Gukta manufactured by them, that receipt and consumption of various ingredients of gutka - supari, tobacco, kattha, lime, perfumes, menthol and lamination & packaging material was being recorded in their records by calculation on the basis of production of gutka pouches shown in RG-I register and thereafter determining by back calculation, the quantity of various ingredients on the basis of the formula of ingredients declared by them to the department, that actual receipt of various ingredients - supari, tobacco, katha, menthol, printed laminated film, PP outers, etc. was not being declared, that as per the chemical analysis of Shyam Bahar Gutka pouches manufactured by M/s. ST, each pouch contains 0.4 gms. of lamination material and the gutka consists of 85.4% to 87.5% by weight of supari, 2.1% to 2.2.% by weight of tobacco, 0.6% to 0.8% of lime, about 2.2 % by weight of kattha and 0.32% to 0.4% by weight of menthol, that in their records, M/s. ST were showing the inflated consumption of tobacco - 13% to 16% while actual consumption of tobacco is 2.1% to 2.2%, that on the basis of consumption of tobacco shown by M/s. ST during 2000-2001, 2001-2002, 2002-2003 and 1-4-2003 to 16-10-2003, the estimated gutka production would be 8,61,931.81 Kgs., Rs. 10,11,838.35 Kgs., 13,25,890.12 Kgs., and 7,62,878.25 Kgs. respectively, while the gutka production shown during these periods by M/s. ST is 1,27,944.37 Kgs., 1,39,383.72 Kgs., 1,81,334.75 Kgs. and 1,22,211.9 Kgs. respectively, which shows that the production has been suppressed to the tune of 600%, that on the basis of quantity of supari dust and waste found in the premises of M/s. DG, during the period December, 2002 to October, 2003, M/s. DG are estimated to have processed about 4,65,000 Kgs. supari for M/s. ST, which is approximately three times the quantity of supari shown to have been consumed by M/s. ST in their records during the same period, that the Gutka which could be packed in 14789.3 Kgs. of PP Outers received from M/s. Anukampa during October, 2001 to July, 2002 and which were consumed during the period upto November, 2002, is more than twice the quantity of Gutka production shown by M/s. ST in their records during that period, that from the actual consumption of supari, tobacco and PP outers, it is clear that M/s. ST were grossly underreporting the production of gutka and unaccounted production of gutka was being cleared without payment of duty, that the packages of Shyam Bahar gutka manufactured by M/s. ST was being sent by them to their outstation dealers at various places through three transport companies - M/s. SKTC, M/s. HTGC and M/s. NTFC, that in the consignment of gutka actually booked by M/s. ST through these transport companies, the buyers were being shown as consigners as well as consignees and the correct description of the goods was not being mentioned and the words "Zarda", "Masala", "Shyam Bahar" etc. were being used for Gutka, that the partners of employees of the transport companies in their statement have stated that the consignments mentioning the description of the goods as "Zarda", "Masala", etc. are actually of Shyam Bahar Gutka received from the factory of M/s. ST, that in this regard, the plea of M/s. ST that another person was using the brand "Shyam Bahar" and a Civil Suit has been filed by that person against M/s. ST, does not help them in any manner, as such a suit was filed only in November, 2003, that in view of judgments of Honble Supreme Court in cases of Hazari Singh v. Union of India reported in 1999 (110) E.L.T. 406 (S.C.); K.I. Pavunny v. Assistant Collector of Central Excise, Cochin reported in : 1997 (90) E.L.T. 241 (S.C.) and Vinod Solanki v. Union of India reported in : 2009 (233) E.L.T. 157 (S.C.) = : 2009 (13) S.T.R. 337 (S.C.) the statements of proprietors/partners and employees of transport companies and of the partners/proprietors of dealers are admissible as evidence, that denial of cross examination of these persons has not resulted in violation of the principles of natural justice and in this regard, he relies upon the judgment of Honble Supreme Court in cases of Kanungo & Co. v. Collector of Customs, Calcutta reported in : 1983 (13) E.L.T. 1486 (S.C.), that in a number of cases, there were no invoice or some old invoices had been given to the transporters, that this is clear from the fact that 40 bags of gutka seized on 20-10-2003 from the premises of M/s. SKTC were covered under invoices issued several days before, that the receipt of the goods under old invoices has been admitted by the employees of the transport companies as well as by the dealers in their statements, that though all the consignments booked by M/s. ST through the above mentioned transport companies mentioned the buyers name as consignors as well as consignee, the employees of the transport companies have clearly stated that these consignments had come from the factory premises of M/s. ST in Thelas and the charges for transportation had been received from M/s. ST in cash, that in a number of cases, the names of fictitious persons were being mentioned as consignors and consignees and this fact has been admitted by some dealers also in their statements, that the estimated production of gutka on the basis of consumption of the tobacco and supari is much more than the quantity on which duty has been demanded on the basis of the records of the transport companies, that seizure of cash of Rs. 4,38,80,530/-from the residential premises of Shri Sanjiv Mishra, for which at the time of seizure, he could not give any explanation whatsoever, is a clear evidence of large scale evasion of duty by M/s. ST, that though Shri Sanjiv Mishra subsequently made a claim that this cash belonged to M/s. Shyam Vanaspati Oil Ltd. (SVOL), a company promoted by him for manufacture of vanaspati, and that this money had been received as share application money from some investors the main investors being, M/s. Betsy Growth Finance, Ltd., M/s. Sunshine Capital and M/s. Stellar Investment Ltd., subsequent investigation conclusively proved that all these transactions were bogus, that though M/s. ST had filed a Civil Writ Petition No. 2198/2004 before Honble Allahabad High Court for release of the currency seized from them, this writ petition has been dismissed vide order dated 20-11-2004, that even in the cases where the invoices were being issued, the quantity mentioned in the invoice on which duty was being paid was much less than the quantity actually being supplied, that this was being done by actually packing 150 bundles of 60 to 66 pouches each in a bora, while the invoices were being issued on the basis that one bora contained 100 bundles of 60 to 66 pouches each, that the transporters had knowledge about non-duty paid nature of the goods and hence, penalty was rightly imposed on them, that penalty has also been rightly imposed on M/s. SVOL, and its directors, Shri Sanjiv Mishra and Pratyoosh Mishra and also on Shri Surender Jain, Shri Virender Jain and Shri V.K. Tulsiyan, as these persons had fabricated false documents to show that the cash of Rs. 4,38,80,530/- seized from the residential premises of Shri Sanjiv Mishra had been received by a newly promoted company, SVOL from the investors, while it was a totally bogus and false claim, that for this offence, penalty on these persons under Rule 26 of the Central Excise Rules has been correctly imposed and that in view of the above, there is no infirmity in the impugned order.

2. We have carefully considered the submissions from both the sides and perused the records. The points of dispute to be decided in this case are as under :-

(a) Whether the duty demand of Rs. 7,17,16,580/- along with interest on it under Section 11AB is sustainable against M/s. ST and whether M/s. ST are liable for penalty under Section 11AC

(b) Whether cash of Rs. 4,38,80,530/- seized from factory cum residential premises of Sh. Sanjiv Mishra is liable for confiscation under Section 121 of Customs Act, 1962 read with Notification No. 68/2003-C.E., dated 4-5-1963 issued under Section 12 of the Central Excise Act, 1944

(c) Whether 85008 pouches of Shyam bahar Gutka seized from the factory premises of M/s. ST are liable for confiscation under Rule 25(1) (b) of Central Excise Rules for non accountal and whether penalty on this count is imposable on M/s. ST under Rule 25(c) of Central Excise Rules, 2002

(d) Whether penalty on M/s. SKTC is imposable under Rule 26 of the Central Excise Rules, 2002

(e) Whether 2300 kgs of processed supari and 15720 kgs. of kachcha supari seized from the premises of M/s. DG at F-12, Talkatora, Lucknow, is liable for confiscation under Rule 25 of the Central Excise Rules, 2002 for non accountal and whether penalty for this imposable on M/s. ST under Rule 25 and on Sh. Dhirender Shukla Prop. M/s. DG under Rule 26 of Central Excise Rules, 2002

(f) Whether penalty under Rule 26 is imposable on M/s. SVOL and Shri Sanjiv Mishra and Shri Pratyoosh Mishra, Directors of M/s. SVOL

2.1 While the questions (a), (b), (c) & (d) are inter-linked and the decision in respect of them depends upon whether the allegation of large scale duty evasion against M/s. ST is sustainable, the question (e) regarding confiscation of Supari seized from the premises of M/s. DG under Rule 25 (1) of Central Excise Rules, 2002 and imposition of penalty on M/s. ST under Rule 25 of the Central Excise Rules, 2002 and on Shri Dhirndra Shukla, Proprietor, M/s. DG under Rule 26 of the Central Excise Rules for non-accountal of Supari and the question (f) regarding liability for penalty under Rule 26 of Central Excise Rules, 2002 on M/s. SVOL, Shri Sanjiv Mishra and Shri Pratyoosh Mishra, Directors of M/s. SVOL for fabrication of documents to show legal origin of the cash of Rs. 4,38,80,530/- seized from the residential premises of Shri Sanjiv Mishra can be decided independently, irrespective of the decision in respect of questions (a), (b), (c) & (d). We will, therefore, consider the questions (e) & (f) first.

3. Supari processed as well as unprocessed seized from the premises of M/s. DG is sought to be confiscated under Rule 25(1) of Central Excise Rules and for this while M/s. ST are sought to be penalized under Rule 25(1), Shri Dhirendra Shukla, Proprietor, M/s. ST is sought to be penalized under Rule 26 of the Central Excise Rules, 2002.

3.1 Rule 25 (1) of the Central Excise Rules, 2002 provides that subject to provisions of Section 11AC of the Central Excise Act, 1944 if any producer, manufacturer, registered person of warehouse or registered dealer -

(a) removes any excisable goods in contravention of any provisions of the Rules or of the notifications issued under these Rules; or

(b) does not account for any excisable goods manufactured or stored by him; or

(c) engages in manufacture, production or storage of any excisable goods without having applied for registration certificate required under Section 6 or

(d) contravenes any of the provisions of these rules or of the notifications issued under these rules with intent to evade payment of duty;

then all such goods in respect of which the contraventions have taken place, shall be liable for confiscation and the producer, manufacturer or, registered person of the warehouse or registered dealer, as the case may be, shall be liable for penalty not exceeding the duty demand on the excisable goods in respect of which the contravention have been committed or Rs. 2,000/- whichever is greater. Rule 10 of the Central Excise Rules, 2002 requires a manufacturer to maintain proper records on daily basis regarding description of the goods produced or manufactured, the opening balance, quantity produced or manufactured, the quantity of the goods removed and their assessable value, duty payable and particulars regarding the amount of duty paid. There is no provision in Rule 10 of the Central Excise Rules, 2002 regarding maintenance of the account of raw materials. Rule 9(5) of Cenvat Credit Rules, 2002/2004 provides for maintenance of account in respect of cenvat credit availed inputs and capital goods, but there is no provision for maintaining account of non-cenvatable inputs. The inputs - supari in this case is a non-cenvatable input. In view of this, we hold that no provisions of the Central Excise Rules, 2002 have been contravened in respect of the raw supari and processed supari seized from the premises of M/s. DG and hence neither M/s. DG nor M/s. ST are liable for penalty under Rule 25(1) nor the seized supari is liable for confiscation under Rule 25(1) of the Central Excise Rules.

3.2 In the impugned order, penalty of Rs. 50 Lakhs has been imposed on Shri Dhirendra Shukla, Proprietor of M/s. DG under Rule 26 of the Central Excise Rules. Rule 26 of the Central Excise Rules, as it stood during the period of dispute, provided for imposition of penalty on any person, who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner dealing with, any excisable goods, which he knows or has reason to believe, are liable for confiscation under the Act or these rules.

3.2.1 In this case, the only allegation against Shri Dhirendra Shukla is not maintaining account of the supari received and processed by him. There is no allegation against Shri Dhirendra Shukla that he was in any manner concerned in acquiring possession of, or was in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner dealing with the gutka manufactured by M/s. ST, which he knew or had reason to believe was liable for confiscation. In our view, just for non-accountal of supari, provisions of Rule 26, as the same stood during the period of dispute, would not be attracted. In view of this, penalty on Shri Dhirendra Shukla is not sustainable and the same is liable to be set aside.

4. The allegations against M/s. SVOL, its directors, Shri Sanjiv Mishra and Shri Pratyoosh Mishra, Shri V.K.Tulsiyan, Chartered Accountant and Auditor of M/s. SVOL, Shri Surinder Jain, Director of M/s. Sunshine and M/s. Betsy Finance and Shri Virendra Jain, Director of M/s. Stellar Investment is that they fabricated documents to show the legal origin of cash of Rs. 4,38,80,530/-seized from the residential premises of Shri Sanjiv Mishra, which according to the Department was sale proceeds of Gutka cleared without payment of duty and without invoices. There is no allegation that Shri Sanjiv Mishra and Shri Pratyoosh Mishra, as Directors of M/s. SVOL and other persons - Shri V.K. Tulsiyan, Shri Virendra Jain and Shri Surendra Jain, had acquired possession of or were in any manner concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner, dealing with any excisable goods which they knew or had reason to believe was liable for confiscation. The charge against these persons is basically of money laundering, for which there are no provisions for penalty in the central excise rules and certainly not in Rule 26, which is attracted in respect of any person, who is concerned in acquiring the possession of or is concerned in dealing with any excisable goods, which he knew or had reason to believe were liable for confiscation. In view of this, we hold that irrespective of whether the currency of Rs. 4,38,80,530/- is liable for confiscation or not, no penalty under Rule 26 is imposable on M/s. SVOL, Shri Sanjiv Mishra and Shri Pratyoosh Mishra as Directors of M/s. SVOL and as such, the part of the impugned order imposing penalty on them under Rules 26 is liable to be set aside.

5. The duty demand of Rs. 7,17,16,580/- against M/s. ST comprises of three components. The first component of duty demand - Rs. 1,46,185/- is on loose gutka pouches and gutka pouches in gunny bags seized from the premises of transport companies and dealers on 20-10-2003 & 12-11-2003, which are alleged to have been cleared without payment of duty. The second component of duty demand is of Rs. 35,80,500/- on the basis of allegation that during the period from 1-1-2001 to 19-10-2003, M/s. ST, even in respect of clearances of gutka pouches under invoices, had packed 50% extra quantity in the gunny bags on which no duty had been paid and for which payment in cash over and above the invoice price had been received from the buyers. In this regard, the departments allegation is that M/s. ST always packed 150 bundles of gutka pouches (each bundle containing 60 to 66 pouches) in one gunny bag, while the invoices were issued on the basis that 100 bundles are packed in one gunny bag. The third component of duty demand of Rs. 6,79,89,895/- is based on the GRs or Lorry challans showing description of the goods as "Zarda", "Masala", "Shyam Bahar" etc. issued by the transport companies M/s. SKTC, M/s. HTGC and M/s. NTFC in respect of consignments booked in the name of a number of persons, showing them as consignors as well as consignees, in respect of which it is alleged that those consignments are of "Shyam Bahar Gutka" manufactured and cleared by M/s. ST and booked by them to their outstation customers, without issue of invoices and without payment of duty.

5.1 The question as to whether the currency of Rs. 4,38,80,530/- seized from the residential-cum-factory premises of Shri Sanjiv Mishra is sale proceeds of the goods cleared clandestinely without payment of duty and on this basis liable for confiscation under Section 12 of the Customs Act, 1962 read with Section 12 of the Central Excise Act, 1944, whether the unaccounted gutka seized from the premises of M/s. ST is liable for confiscation and whether the transporters including M/s. SKTC are liable for penalty under Rule 26 of the Central Excise Rules, 2002 are linked with the main question - whether M/s. ST were indulging in large scale evasion of duty and whether on the basis of evidence relied upon by the Department, the duty demand of Rs. 7,17,16,580/- is sustainable against them.

6. Out of total duty demand of Rs. 7,17,16,580/- the duty demand of Rs. 7,15,70,395/- (Rs. 6,79,89,895/- + Rs. 35,80,500/-) is in respect of the goods booked through the transport companies - M/s. SKTC, M/s. HTGC and M/s. NTFC to outstation buyers and the same is based on -

(a) Statements of the Proprietors/Partners and employees of the three transport companies - M/s. SKTC, M/s. HTGC and M/s.NTFC stating that the words - "Zarda", "Masala", "Shyam Bahar" mentioned in the GRs/Lorry challans issued by them imply Shyam Bahar brand gutka manufactured by M/s. ST, that the consignments of Shyam Bahar gutka packed in gunny bags (boras) had been received directly from the factory of M/s. ST through a tempo or a handcart (Thela) and the weight of one bora was from 20 kgs. to 25 kgs., that the payments for transport charges were received from M/s. ST in cash and in some cases from the consignees and that most of the consignments were either not accompanied by any invoice or were covered by old invoices; and

(b) Statements of dealers stating that they were receiving Shyam Bahar brand gutka from M/s. ST, Lucknow described in the GRs/Lorry challans as "Zarda", "Masala", etc., that M/s. ST were charging Rs. 7800/- per bora supposed to be of 100 bundles of 60 to 66 two gram pouches of gutka each, as against invoice price of Rs, 5,554/- per bora of 100 bundles, but the quantity actually packed in each bora used to be 150 bundles, that the Shyam Bahar brand gutka consignments were being sent by M/s. ST to them through the transport companies by booking the same in different names and that the payments for gutka were being made by them to M/s. ST in cash.

The duty demand of Rs. 1,46,185/- in respect of the goods seized from the premises of M/s. SKTC some dealers is also based on the statements of employees of M/s. SKTC and the dealers that except for the old invoices, there were no other valid invoice in respect of those goods.

The evidence of excess consumption of raw materials like Supari, Tobacco, Menthol and PP Outers not commensurate with the production of gutka recorded in their records and on which duty was paid and the instances of use of one invoice more than once and clearing consignments of gutka under old invoices, as discussed in details in para 24.5 and 24.6 of the show cause notice, have been used as supporting evidence.

6.1 The main plea of the Appellants, however, is that their sales are at factory fate, that the consignments of gutka have been booked by their customers after taking delivery from the factory, that the statements of transport companys Proprietors/partners or employee or of dealers stating that it is M/s. ST who were booking the consignments of Gutka by describing the same as "Zarda", "Masala" etc. are of no evidence value, as in spite of their request, the cross examination of those persons was not allowed and that in view of this, confirmation of duty demand of based on the records of Transport Companies is without any basis.

6.2 We find that there is merit in the plea of M/s. ST regarding cross examination, as Honble Allahabad High Court, which is the jurisdictional High Court in this case, in para 14 of its judgment in case of C.C.E., Meerut-I v. Parmarth Iron Pvt. Ltd., reported in : 2010 (260) E.L.T. 514 (All.), relying upon the judgments of Honble Supreme Court in cases of Arya Abhushan Bhandar v. U.O.I, reported in : 2002 (143) E.L.T. 25 (S.C.) and Swadeshi Polytex Ltd. v. Collector, Central Excise, reported in 2000 (122) E.L.T. 641 (S.C.) and of Honble Bombay High Court in case of Gyan Chand Sant Lal Jain v. U.O.I, reported in 2001 (136) E.L.T. 9 (Bom.), has held that at the stage of adjudication, it is the right of an assessee to seek cross examination of the witnesses whose statements are sought to be relied upon by the Revenue and that the cross examination is necessary so that it could be established whether the statements recorded from the said witnesses had been voluntarily given, are relevant for the issue or are based on personal knowledge or on legal records or on hearsay. Honble Bombay High Court in case of Gyan Chand Sant Lal Jain v. U.O.I (supra) after distinguishing the judgment of Honble Supreme Court in case of Kanungo & Co. reported in : 1983 (13) E.L.T. 1486 (S.C.) held that if in course of adjudication proceedings, cross examination of some persons whose statements have been relied upon by the Revenue, is sought and the same is refused, it would amount to breach of the principles of natural justice, but principles of natural justice are not violated if in absence of any specific request, witnesses are not voluntarily offered for cross examination, provided the relied upon statements had been made available to the assessee and assessee has been given fair opportunity to explain the same.

6.3 The learned Departmental Representative has cited the judgments of Honble Supreme Court in cases of Hazari Singh v. U.O.I. (supra) and K.I. Pavunni v. Assistant Collector (supra) in support of his plea that the statements of Proprietors/Partners & employees of transport companies - M/s. SKTC, M/s. HTGC and M/s. NTFC and of dealers, which have not been retracted or if the same have been retracted, the retractions being bald retractions without any evidence of coercion, threat or inducements having been used in recording of statements, are mere afterthoughts, have to be treated as admissible evidence in support of allegation of duty evasion against M/s. ST and hence there was no need for permitting their cross examination. We do not agree with this plea of the learned DR. The statement of a person being his voluntary statement, truly given to the best of his knowledge and that statement being correct statement reflecting the actual state of affairs are two different things. The judgments cited by the learned DR are about the admissibility as evidence of the voluntary statements given by a person before a gazetted officer of Customs under Section 108 of the Customs Act or before a gazetted central excise officer under Section 14 of the Central Excise Act, 1944 and if such statement has been retracted, when such retractions can be accepted. But such a voluntary statement recorded by a gazetted officer of customs/central excise can be used for proving the charge of duty evasion against an assessee only if it is correct, it reflects the actual state of affairs and for ascertaining this, the cross examination of the person may be necessary to ascertain as to whether the statement was without any threat, duress or coercion, whether it was based on his personal knowledge, or documentary evidence or just hearsay - on what basis the statement had been made. In case of the report of a Chemical Examiner on which some allegation of duty evasion against the assessee is based, his cross examination may be necessary for ascertaining as to which method had been adopted by him for the chemical test. Therefore, if cross examination of some witnesses is requested giving adequate justification for the same, the same has to be allowed. If, however, the statement of a person, relied upon by the Department is fully backed by concrete documentary evidence on records, his cross examination would not be required. Honble Supreme Court, in case of H. Siddique v. A. Ramalingam reported in : 2011 (268) E.L.T. 436 (S.C.), relying upon its earlier judgment in case of State of Bihar & Others v. Sri Radha Krishna Singh & Others reported in : AIR 1983 SC 684 has held that admissibility of a document is one thing and its probative value quite another and the two aspects can not be combined. Thus, the statement of a witness recorded under Section 14 of the Central Excise Act, 1944, even if admissible as evidence, may not carry any conviction unless its probative value is tested by permitting his cross examination.

6.4 In this case, the Appellant vide their letter dated 5-2-2006 to the Commissioner had sought cross examination of 25 persons which included Shri Praveen Rastogi, Partner, M/s. SKTC, Shri Anjani Kumar Shukla, employee of M/s. SKTC, Shri Mithlesh Kumar of M/s. HTGC Shri Dhirendra Shukla of M/s. DG, the concerned person of SIIR, New Delhi and some traders - Shri Mahesh Chaurasia of M/s. Shanker Traders, Lakhimpur and Shri Shiv Kumar Jaiswal of M/s. Jaiswal Stores, Sitapur. However, perusal of the impugned order does not indicate that their cross examination has been allowed. The request for cross examination has been rejected on the ground that the person sought to be cross examined are co-noticees who can not be compelled to appear for cross examination, which is incorrect as partners and employees of M/s. SKTC, employees of M/s. HTGC, and Chemical Examiner of SIIR whose cross examination had been sought along with others, are not co-noticees. The cross examination of the proprietors/partners and employees of the transport companies is necessary to ascertain as to on what basis they have stated that all the consignments where the description of goods in the GRs/Lorry challans was mentioned as "Zarda", "Masala", or "Shyam Bahar" were of Shyam bahar gutka manufactured by M/s. ST and received directly from the factory of M/s. ST. Cross examination of Shri Dhirendra Shukla of M/s. DG is necessary for ascertaining as to on what basis he had stated that waste in form of Burada/dust and chhilan generated in processing of supari is 4%, as the quantity of supari processed by M/s. DG for M/s. ST during December, 2002 to 19-10-2003 period has been estimated on the basis of the quantity of waste found in the premises of M/s. DG. Similarly, the cross examination of the Chemical Examiner of SIIR, who tested the samples of Shyam Bahar gutka for ascertaining its tobacco content is necessary for ascertaining as to by which method the test had been conducted. The report of the Chemical Examiner of SIIR is important as -

(a) While SIIR has reported the tobacco content of Shyam Bahar Gutka as 2.1% to 2.2%, by weight, as per the formula intimated by M/s. ST to the Department, the tobacco content of the gutka is supposed to be about 13% to 16% by weight and if the SIIR report is correct, it would be a clinching evidence of a clever modus operandi for underreporting the production of Gutka by showing inflated figure of consumption of tobacco; and

(b) the exact figure of consumption of tobacco for the entire period of dispute i.e. 2000-2001, 2001-2002, 2002-2003 and 1-4-2003 to 16-10-2003 period of 2003-04 are available and if the SIIR report about tobacco content of Shyam Bahar Gutka being 2.1% to 2.2% by weight is correct, this report coupled with the consumption of PP Outers and Supari, would be a conclusive evidence of gross under reporting of the production of gutka. Since actual tobacco content is a crucial point, if the seized goods are still available, a fresh sample may be drawn in presence of the Appellant and got tested through Central Revenue Central Laboratory (CRCL).

6.5 In view of the above discussion, the order confirming duty demand against M/s. ST and imposing penalty on them under Section 11AC has to be set aside and the matter has to be remanded to the adjudicating authority for de novo adjudication after permitting the cross objection of Proprietors/Partners and employees of transport companies, Shri Dhirendra Shukla of M/s. DG, Chemical Examiners of SIIR and of any other witnesses whose statements have been relied upon by the adjudicating authority and their cross examination has been requested by the Appellant giving justification for the same, and also as mentioned above, getting a fresh sample of gutka from the seized goods, if still available, tested through CRCL and taking that test report also into account after permitting the cross examination of the Chemical Examiner; if requested. If, however, the witnesses whose statements have been recorded under Section 14 of the Central Excise Act, 1944 by a Gazetted Officer and the same are relied upon by the Department, and due to the circumstances enumerated in Section 9D(1)(a), their cross-examination is not possible, in terms of the provisions of Section 9D(i) read with Section 9D(2), the same can be admitted as evidence provided the procedure and the principles laid down in this regard by Honble Delhi High Court in its judgment dated 18-8-2009 in case of M/s. J&K Cigarettes Ltd., : 2009 (242) E.L.T. 189 (Del.) = : 2011 (22) S.T.R. 225 (Del.) M/s. GTC Industries Ltd. & Others v. C.C.E. [: 2009 (242) E.L.T. 189 (Del.)] are followed.

7. As discussed above, the question of confiscation of currency of Rs. 4,38,80,530/- seized from the residential-cum-factory premises of M/s. ST under Section 121 of the Customs Act, 1962 read with notification No. 68/03-C.E., dated 4-5-1963 issued under Section 12 of the Central Excise Act, 1944, the question of confiscation of 85008 pouches of Gutka seized from the factory of M/s. ST for non-accountal and penalty on M/s. ST on this count and the question of imposition of penalty on the transporter, M/s. SKTC under Rule 26 of the Central Excise Rules, 2002 are linked with the question of sustainability of the duty demand from M/s. ST in respect of consignments of Shyam Bahar Gutka alleged to have been booked through M/s. SKTC, M/s. HTGC and M/s. NTFC Therefore, the order of confiscation of currency, confiscation of 85008 pouches of gutka for non-accountal and penalty on M/s. ST on this count and imposition of penalty on M/s. SKTC under Rule 26 of Central Excise Rules has also to be set aside and these matters have also to be remanded for de novo adjudication. Since at the time of seizure of the currency of Rs. 4,38,80,530/- Shri Sanjiv Mishra could not give any explanation for the same and his subsequent explanation, based on the certificate of their Chartered Accountant, Shri V.K. Tulsian that this currency is the share application money received for his new venture, M/s. SVOL, from some investors - three main investors being M/s. Sunshine Capital Ltd., M/s. Betsy Growth Finance and M/s. Stellar Investment, has been found to be false, in case the duty demand of Rs. 7,17,16,580/- is upheld against M/s. ST, the currency of Rs. 4,38,80,530/- would have to be treated as sale proceeds of goods cleared without payments of duty and would be liable for confiscation under Section 121 of the Customs Act, 1962 read with Section 12 of the Central Excise Act, 1944. However, in the event of confiscation of the currency and 85008 pouches of gutka, in accordance with the provisions of Section 34 of the Central Excise Act, 1944, an option to redeem the same on payment of redemption fine would have to be given.

8. In view of our above discussions -

(a) the duty demand against M/s. ST along with interest and the penalty on them under Section 11AC is set aside and the matter is remanded to the Commissioner for de novo adjudication keeping "in view our observations in para 7.5 of this order;

(b) Penalty under Rule 26 of the Central Excise Rules, 2002 on M/s. SKTC, confiscation of Indian currency of Rs. 4,38,80,530/- seized from the residential-cum-factory premises of Shri Sanjiv Mishra and confiscation of 85008 pouches of gutka seized from factory premises of M/s. ST for non-accountal and penalty on them on this count is set aside and the matter is remanded to Commissioner for de novo adjudication keeping in view our observation in para-8 of this order;

(c) confiscation of supari seized from M/s. DG and penalty on M/s. ST under Rule 25 for non-accountal of supari and penalty under Rule 26 of Central Excise Rules, 2002 on Shri Dhirendra Shukla, Proprietor, M/s. DG is set aside; and

(d) Penalty under Rule 26 of the Central Excise Rules, 2002 on M/s. SVOL, Shri Sanjiv Mishra & Shri Pratyoosh Mishra, Directors of M/s. SVOL is set aside.

Since the matter is about eight years old and huge revenue stakes are involved, the Commissioner is directed to complete the de novo adjudication proceedings as early as possible. The Appellants are also directed to fully cooperate with the Department in this regard.