Decided on March 16,2015

C.C.E. Appellant
Surya Cotspin Ltd. And Ors. Respondents


D.N. Panda, J. - (1.)THIS batch of appeals at serial No. 4 to 19 of cause list of 17/10/2014 arising out of common cause were earlier before division bench. But due to enhancement of pecuniary jurisdiction of single bench from Rs. 10 lakhs to Rs. 50 lakhs, these appeals came up before single bench. The division Bench, while deciding Revenue Appeal No. 121/06 -EX [DB] on 5.12.2013 in the case of CC, Chandigarh Vs. Vinay Traders arising out of common cause as is in the present batch of appeals directed Registry to keep a copy of the final order passed therein vide No. 58638/13 in records of the present batch of appeals registered as E/2566/2005 to 2580/2005 and E/120/2006.
1.1 Revenue being unsuccessful before learned Commissioner (Appeals) has challenged his decision in these appeals contending that as perverse and ill -founded sanctioning evasion ignoring cogent evidence on record.

1.2 Respondent manufacturer M/s. Surya Cotspin Ltd. evaded excise duty of Rs. 22,61,821/ -. It faced duty demand to that extent with penalty of equal amount thereof under Rule 9(2) and 173(2) of Central Excise Rules 1944 read with Section 11AC of the Central Excise Act 1944. Penalty of Rs. 1,00,000/ - each was also imposed on Shri Madan Lal, Shri Rajesh Kumar Goel, who were Directors of that Company and similar penalty was imposed on Shri Praveen Kumar, Accountant of the Company. So also the parties (who were dealers of the offending goods) as tabulated hereinafter faced penalties of Rs. 10,000/ - each being buyers of duty evaded goods being concerned with the same. However, all these respondents were exonerated by learned Commissioner (Appeals) from charge of evasion.

(2.)1 Respondent, Surya Cotspin Limited was manufacturer of Cotton Yarn. Investigation found that it had removed 2,76,050 kgs. of unaccounted Cotton Yarn without payment of duty from its factory under certain invoices issued to different dealers of Ludhiana, Amritsar and Delhi as tabulated below. JUDGEMENT_23_LAWS(CE)3_2015.htm
2.2 Investigation had information that the Respondent M/s. Surya Cotspin Limited suppressing production quantity of cotton yarn and were clearing the same without payment of duty using parallel set of invoices issued to different buyers. Search was therefore conducted on 3.3.2001 to its premises to find out its modus operandi. 86 bags (50 kgs. each) of cotton yarn of 4,300 Kgs. were found unaccounted and lying in the packing room of its factory. That was not recorded in RG I Register. It was also found that the respondent manufacturer had recorded production in the range of 2,700 kgs. to 3300 kgs. per day. No materials were placed before investigation to explain above unaccounted quantity of yarn found physically except explaining that the said quantity was the production of the previous day, i.e., 2/3/2001.

2.3 Investigation recovered an invoice book in the course of search. That did not contain folio numbers 251 to 300 and such fact was admitted by Shri Rajesh Goel, Director in his statement dated 03/03/2001. According to him, that book was resumed by Sales Tax Department on 21/2/2001 for some investigation and from that invoice book, invoices numbers 251 to 289 were issued.

3.1 On 7/03/2001, a person, named, Shri Swarat Singh along with another handed over photocopies of 114 invoices issued by M/s. Surya Cotspin Limited along with four copies of octroi receipts and one copy of transporters GR to the investigation. Statement recorded from that person revealed that he joined in service of the respondent company as supervisor in May, 1999 and was aware of the issuance of above invoices for clandestine removal of the goods manufactured by the Respondent under the instruction of its Directors. In his letter he also stated that after the goods reached to the buyers, relevant documents, i.e., invoices, GRS and octroi receipts were destroyed by that respondent. He further stated that 114 copies of parallel invoices were Xeroxed by him to expose duty evasion made by the respondent company.

3.2 The parallel invoices stated above when cross verified, it was revealed that 21 invoices were instrumental for clearance of unaccounted goods and 93 invoices were parallel which were used to clandestinely clear 220 to 300 kgs. of yarn valued Rs. 2,41,65,681/ - to different buyers evading Central Excise Duty of Rs. 22,18,207/ -. Investigation also noticed from record of municipality authority of different destinations that clandestinely cleared goods had entered into their jurisdictions.

4.1 Ld. Adjudicating authority in the course of adjudication examined particulars of 114 copies of invoices aforesaid with the material facts available on record and found that 93 of such invoices were parallel and 21 invoices were carrier of unaccounted goods. He tested those invoices with the evidences gathered from octroi authority of Ludhiana Municipality corroborating entry of clandestinely removed goods to that municipal jurisdiction.

4.2 To find out relevancy of the parallel invoices, some of the invoices were sent for examination by Govt. document examiner. That authority informed that the documents were copies of some original and signature appearing therein were of Shri Madan Lal, Director of the respondent manufacturer.

4.3 Ld. Adjudicating authority found that there was recording of production around 5,000 kgs, after visit by central excise officers on 03.03.2001, while the production quantity recorded was ranging 2,700 kgs. to 3,000 kgs., prior to that date. This supported case of investigation further, showing oblique motive of the manufacturer suppressing production quantity and clearance thereof through parallel invoices evading duty.

5. Sequel to the above, it was also found that mobile wing of the Punjab Sales Tax authority seized 5,057 kgs. of cotton yarn on 21.02.2001. Such goods were clandestinely cleared by the respondent manufacturer in terms of Invoice Nos. 290 and 291, both dated 21.02.2001 and without accompanying invoices for which those were seized by the sales tax authority. The invoice book recovered from the factory of the respondent manufacturer by the sales tax department of Patiala on 21.02.2001 revealed that invoice Nos. 290 and 291 were blank. Such evidence also proved methodology of clandestine clearances evading duty and not recording actual quantity manufactured on each day.

6. Learned Adjudicating authority came to the conclusion that manufacturer respondent was habitually clearing the goods clandestinely. He also opined that upon reaching of the clandestinely cleared goods at the respective destination, all original invoices accompanying such goods were destroyed. Adjudication was accordingly completed holding that clearance of 2,76,050 kgs. of yarn valued at Rs. 2,04,39,741/ - resulted in evasion of excise duty of Rs. 22,61,821/ - recoverable from M/s. Surya Cotspin Ltd. with equal amount of penalty under Rules 9(2) and 173Q of Central Excise Rules read with section 11AC of Central Excise Act, 1944. Similarly, penalty of the aforesaid magnitude were levied on the persons concerned and involved therein.

7. Objecting to the adjudication, when respondents went in appeal before ld. Commissioner (Appeals), they were exonerated from charges. He allowed their appeals on the ground that the original invoices were not produced before them for which principles of natural justice being violated, adjudication was not sustainable following the decision in the case of Roman Catholic Mission Vs. S [ : AIR 1966 SC 1457] and also the decision of the Tribunal in the case of TM Industries Vs. CCE [ : 1993 (68) ELT 807 (Tri.)].

8. Revenue being aggrieved by the order of learned Commissioner (Appeals) came in appeal before the Tribunal in this batch of appeals and Revenue urged that it is not only the parallel invoices contributed to the adjudication, but various factors like recording of higher production quantity subsequent to visit by investigation proving suppression of production, report of Govt. examiner showing signature of directors of respondent company on the parallel invoices, seizure of goods in the course of search by sales tax authority, octori record showing movement of clandestinely removed goods, seizure of two blank invoices, finding of physically inventoried stock unaccounted etc. supported adjudication. Therefore, ignorance of all such material evidence by learned appellate authority, caused peril to Revenue for which it has been seriously prejudiced.

9.1 On the contrary, contention of the respondents was that the decision in one of the case of dealers made on 05.12.2013 by Final Order No. 58638/2013, dated 05.12.2013 should not guide Tribunal to hold against present respondents. Photocopies given by the informer were unreliable since original thereof were not produced. Respondents relied on the following decisions to contend that adjudication is bad in law: -

i. CCE vs. Welcure Drugs & Pharmaceuticals Ltd. [ : 2014 (303) ELT 236 (Tri. Del.)].

ii. Pan Parag India Ltd. vs. CCE [ : 2013 (291) ELT 81 (Tri.)]

iii. TM Industries vs. CCE [ : 1993 (68) ELT 807 (Tri.)]

iv. J. Yashoda vs. K. Shobha Rani [ : 2007 (212) ELT 458 (SC)]

v. Collector vs. East Punjab Traders [ : 1997 (89) ELT 11 (SC)]

vi. Truwoods Pvt. Ltd. vs. CC : 205 (186) ELT 135 (Trib.)]

vii. South Indian Television (P) Ltd. vs. Commr. [ : 2001 (136) ELT 243 (Trib.)]

viii. Indian Optics Pvt. Ltd. vs. Comr. [2000 (123) ELT 1022 (Trib.)].

ix. Pan Parag India Ltd. vs. CCE, Kanpur [ : 2013 (291) ELT 81 (Tri.)]

9.2 It was further urged on behalf respondents that the report of the Sales Tax Department seizing the truck carrying the goods cannot be used against them. Findings in adjudication order basing on report of sales tax authority does not bind the central excise authority to hold against respondents. The blank copy of invoices is not the evidences since Shri Nirmal Singh who authorised release of the goods was neither an employee of the respondent manufacturer nor he was connected to any dealer of the goods. The driver carrying the goods in the truck did not say that the goods came from the premises of the respondents. Parallel invoices were brought by unscrupulous persons to cause damage to the respondents. Examination of the documents by Govt. examiner did not establish the case of Revenue. Signature of Shri Madan Lal, Director on the seized documents was not his signature nor of Shri Praveen Kumar. Therefore, those are unreliable documents and cannot be used against respondents.

10. Heard both sides and perused the records.

11. Finding in adjudication relating to clandestine removal of goods using parallel invoices corroborated by entries in Octroi record of Municipality Authority remained uncontroverted in absence of any cogent evidence led by Respondents. Revenue discharged its burden of proof. Respondent failed to demolish the adjudication based on multiple factors including the statements recorded under Section 14 of Central Excise Act, 1944. Municipality record being public record proved the questionable modus operandi of the respondent manufacturer showing movement of clandestinely removed goods. Recording of higher quantity of production after visit by investigation self speak suppression of production prior to search. Suppressed production cleared clandestinely was proved from blank and parallel invoices found by investigation. The dealers tabulated herein before having been found to be buyers of such goods, they supported case of Revenue. Plea of unreliability of photocopies failed to sustain when signature of director of respondent company therein was found to be same as reported by Govt. document examiner. Blank copies of invoices found from invoice book show ill intention of respondent manufacturer in absence of any explanation there for. Goods in the factory of respondent manufacturer were found during search to have been unaccounted. No doubt copy of copy is inadmissible in evidence as has been held the Hon'ble Supreme Court in the case of Collector of Customs, Bombay vs. East Punjab Traders [ : 1997 (089) ELT 0011 (SC)], but in the present case, parallel invoices were not the only material to hold clandestine removal. There are several other contributory factors as argued by Revenue and found by learned Adjudicating Authority established clandestine removal of goods made by respondent manufacturer with the aid of the dealers causing evasion of excise duty. None of the arguments of Revenue were rebutted by respondents leading any cogent and credible evidence.

When multiple factors and preponderances of probabilities contributed to the adjudication, that cannot be brushed aside. Learned Commissioner (Appeals) committed error in ignoring all such vital evidence and material facts borne by record. There was evasion of duty by Respondent manufacturer with the aid of its dealers tabulated above dealing with clandestinely removed goods.

(9.)WHEN the material evidence established fraud against Revenue white collar crimes committed under absolute secrecy shall not be exonerated from penal consequence of law following Apex Court judgment in the case of K.I. Pavunny v. AC, Cochin - : 1997 (90) E.L.T. 241 (S.C.). An act of fraud on Revenue is always viewed seriously. Fraud and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. It has been held by Apex Court in the case of Commissioner of Customs, Kandla v. Essar Oil Ltd. - : 2004 (172) E.L.T. 433 (S.C.) that by fraud is meant an intention to deceive; whether it is from any expectation of advantage to the party himself or from the ill will towards the other is immaterial. The expression fraud involves two elements, deceit and injury to the deceived. Undue advantage obtained by the deceiver, will almost always call loss or detriment to the deceived. Similarly a fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. (See S.P. Changalvaraya Naidu v. Jagannath [ : 1994 (1) SCC 1].

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