RAJ LAXMI PRODUCTS PVT. LTD. Vs. COMMISSIONER OF C. EX.
LAWS(CE)-2015-2-69
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on February 03,2015

Raj Laxmi Products Pvt. Ltd. Appellant
VERSUS
COMMISSIONER OF C. EX. Respondents




JUDGEMENT

RAKESH KUMAR, J. - (1.)
(2.)THE facts leading to filing these three appeals are in brief as under:
1.1 M/s. Raj Laxmi Products Pvt. Ltd., A -90, Narayana Industrial Area, Delhi (hereinafter referred to as RPPL) are manufacturers of Gutkha & Pan Masala of the brands 'Kimti' & 'Rangila'. The duty demand in this case is in respect of the Gutkha of Kimti Brand alleged to have been cleared clandestinely by RPPL without payment of duty. Shri Hira Lal Makhija is the owner of Kimti Brand. The appellant company (RPPL) is a Pvt. Ltd. company with Shri Prabha Shankar Shukla and Shri Kishan Lal Sonwani as the Directors. Shri Harish Kumar Makhija, the brother of Shri Hira Lal Makhija owns the brand 'Kesar' and the Gutkha of 'Kesar' Brand is manufactured by M/s. Sun Products Pvt. Ltd., Transport Nagar, Kanpur (hereinafter referred to as SPPL). Shri Babu Lal Makhija is the brother of Shri Hira Lal Makhija and Shri Harish Makhija, having residence at R -713, New Rajinder Nagar, Delhi. The residence of Shri Harish Makhija owner of the brand 'Kesar' is at 117/618, Pandu Nagar, Kanpur. The Directorate General of Central Excise Intelligence received an information that RPPL and SPPL are evading duty in respect of Gutkha of 'Kimti', 'Rangila' and 'Kesar' Brand being manufactured by them by removing the same in a clandestine manner and that the consignments of Gutkha cleared clandestinely were being dispatched to various out -stations through railways and that the railway bookings were being done through some railway booking agents. Accordingly, on 12 -2 -2004, the factory premises of RPPL at Narayana Industrial Area, Delhi, the factory premises of SPPL at Transport Nagar, Kanpur, the residence of Shri Babu Lal Makhija at New Rajinder Nagar, Delhi where Shri Hira Lal Makhija was also staying, the residential premises of Shri Harish Makhija at Pandu Nagar, Kanpur, residential premises of railway booking agent Shri Manoj Gupta at M -137, Pratap Vihar, Sector 12, Ghaziabad, residential address of Railway Booking Agent Mohd. Iliyas at 156/6, Islam Nagar, Ghaziabad and some other parties were searched. From the residential premises at R -713, New Rajinder Nagar, Delhi of Shri Babu Lal Makhija, who was in the business of Supari & Gutkha, cash of Rs. 17,64,870/ - was recovered and the same was placed under seizure on reasonable belief that the same is the sale proceeds illicitly cleared Gutkha by RPPL. From the residential premises of Shri Harish Makhija at Kanpur, cash of Rs. 19 lakh was recovered which was placed under seizure under reasonable belief that the same is the sale proceeds illicitly cleared Gutkha by RPPL.

1.2 In the factory premises of RPPL at Narayana Industrial Area, Delhi, 259.5 kg of Supari, 690.2 kg of Gutkha was found in excess of the recorded balance and similarly 4039 kg of lamination material was also found to be unaccounted. In the factory premises of SPPL there was shortage of 410 kg of Supari vis   -vis recorded balance and also a slip indicating receipt of 18 bags (1278.6 kg) of Supari from Shri Ram Lakhan Sharma was also recovered while this quantity of Supari was not reflected in their stock account. From the residential premises of Shri Manoj Gupta, Railway Booking Agent, a notebook was seized which appeared to be containing a brand -wise details of the booking of Gutkha consignments through Railways. The notebook mentioned the RR No. and against them, the number of packages under the Heading 'Kimti'. Shri Manoj Gupta on enquiry, in his statement recorded under Section 14 of Central Excise Act, 1944, explained that the details in the diary mentioned under the Heading 'Kimti' are the details of the consignments of 'Kimti' brand Gutkha booked for transportation through railways, that the details consist of Railway Receipt Number (RR No. ) and number of packages, that the consignment were being received through tempo from the factory premises of RPPL, and that one Shri Sumit was informing him about the arrival of the consignments and he was also mentioning the consignor's name and the destination. On the basis of the details in their diary seized from Shri Manoj Gupta, the Investigating Officers determined the quantity of Gutkha which had been booked through railways and its value and accordingly, the Central Excise duty leviable in respect of the same was determined as Rs. 57,51,000/ -. However, neither any attempt was made to obtain from the railways, the copies of the RRs whose details were mentioned in the notebook seized from the residential premises of Shri Manoj Gupta nor those RRs were given by the railways. Though, there was an employee named Sumit, working with RPPL, no enquiry was made with him. As regards, the seizure of cash of Rs. 17,64,870/ - from the premises of Shri Babu Lal Makhija in Delhi, initially Shri Babu Lal Makhija did not respond to seven summons issued to them to explain the cash recovery, but subsequently he appeared before the Investigating Officers on 9 -11 -2004 and informed that the cash belonged to one Shri Ashok Jain of Calcutta and who had left the cash with him for purchase of some property. Similar explanation was given by Shri Harish Makhija in respect of the cash recovery of Rs. 19 lakh from his residential premises at Kanpur. Enquiry with Shri Kishan Lal Sonwani and Shri Prabha Shankar Shukla, Directors of RPPL indicated that they were Directors only on papers and were getting a salary of Rs. 3,000/ - per month each, that the land, building, plant and machinery of RPPL had been taken on lease from the Makhijas' and that RPPL had also taken loan of Rs. 71 lakh from Makhijas. Inquiry also indicated that it is Shri Hira Lal Makhija and Shri Harish Makhija who were controlling the entire activities and business of RPPL.

1.3 It is in view of the above investigation that show cause notice dated 8 -12 -2004 was issued to RPPL, Delhi, Shri Hira Lal Makhija living at R -713, New Rajinder Nagar and Shri Harish Makhija living at 117/618, Pandu Nagar, Kanpur for - (a) recovery of Central Excise duty amounting to Rs. 57,51,000/ - as detailed in Annexures I & II to the show cause notice from RPPL in respect of clandestine clearances of Gutkha along with interest thereon under Section 11AB of Central Excise Act, 1944; (b) imposition of penalty on RPPL under Section 11AC of Central Excise Act, 1944; (c) appropriation of an amount of Rs. 35 lakh voluntarily paid by RPPL during investigation towards their duty liability; (d) confiscation of Rs. 17,64,870/ - seized from the residential premises of Shri Hira Lal Makhija at Delhi and cash of Rs. 19 lakh seized from the residential premises of Shri Harish Kr. Makhija at Kanpur, under Section 121 of Customs Act, 1962 read with Section 12 of the Central Excise Act, 1944 as sale proceeds of the clandestinely cleared Gutkha; and (e) imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on Shri Harish Kr. Makhija and Hira Lal Makhija.

1.4 The above show cause notice was adjudicated by the Commissioner of Central Excise, Delhi, one vide Order -in -Original No. 149/05, dated 9 -11 -2005 by which the Commissioner - (a) confirmed the duty demand of Rs. 57,51,000/ - against RPPL under proviso to Section 11A(1) of Central Excise Act, 1944 along with interest thereon under Section 11AB ibid and appropriated an amount of Rs. 35 lakh already paid by them during investigation towards this demand; (b) imposed penalty of Rs. 57,51,000/ - on RPPL under Section 11AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002; (c) ordered confiscation of the cash of Rs. 19 lakh seized from the residential premises of Shri Harish Kr. Makhija and the cash of Rs. 17,64,870/ - seized from the residential premises of Shri Hira Lal Makhija under Section 121 of Customs Act, 1962 read with Section 12 of the Central Excise Act, 1944; and (d) imposed penalty of Rs. 50 lakh each on Shri Hira Lal Makhija and Shri Harish Kr. Makhija under Rule 26 of the Central Excise Rules, 2002.

Heard both the sides.

Shri Krishan Kant, Advocate, the ld. Counsel for the appellant, pleaded that except for certain unaccounted quantity of Supari, Gutkha and packing material in the factory premises of RPPL, no other irregularity had been found and as such there was no shortage of the finished product vis   -vis the balance recorded in the RG -1 Register, that no incriminating documents showing illicit clearances of 'Kimti' Brand or 'Rangila' Brand Gutkha were recovered from the factory premises, that except for currency of Rs. 17,64,870/ - seized from the residential premises of Shri Babu Lal Makhija and Hira Lal Makhija, which belong to one Shri Ashok Jain, Calcutta and was meant for purchase of some property, no evidence of any clandestine manufacture and clearance of 'Kimti' or 'Rangila' Brand Gutkha was found, that the stand of Shri Babu Lal Makhija with regard to the currency seized from his premises, from the very beginning, has been that the currency belongs to one Shri Ashok Jain of Calcutta which had been left by Shri Jain for purchase of some property and similarly in respect of seizure of currency of Rs. 19 lakh from the premises of Shri Harish Kr. Makhija at Kanpur, from the very beginning, his stand has been that this currency is meant for purchase of some property and is not the sale proceeds of illicitly cleared Gutkha, that in any case the burden of proving that the currency seized at Delhi and Kanpur was the sale proceeds of illicitly cleared Gutkha and hence, liable for confiscation is on the Department and in this regard, he relies upon the judgment of the Tribunal in the case of Pandit D.P, Sharma v. CCE, Calcutta -II reported in : 2001 (137) E.L.T. 692. the Civil Appeal against which has been dismissed by the Apex Court vide judgment reported in : 2003 (157) E.L.T. A201 (S.C.), that the duty demand of Rs. 57,51,000/ - against RPPL is based only on the entries in a notebook recovered from the premises of a Railway booking agent Shri Manoj Gupta, that these entries are the entries in the notebook under the title 'Kimti' and according to Shri Manoj Gupta, the details consist of the RR Numbers and the number of packages of the various consignments, that the Department has not obtained the copies of those RR's from the Railways and, therefore, it is not known as to whether the said Railway Receipts (RR) mentioned in the notebook of Shri Manoj are the actual and real railway receipts in respect of the consignments actually booked through railways, that merely because Shri Manoj Gupta, states that the goods were being received in some vehicles from the factory of RPPL and in this regard one Shri Sumit was intimating him, it cannot be concluded that those consignments were the consignments of Gutkha cleared without payment of duty by RPPL, that no inquiry has been made with Shri Sumit, an employee of RPPL, named by Shri Manoj Gupta, that as held by the Tribunal in the case of Chariot Cement Company v. Commissioner of Customs, Central Excise, BBSR -II reported in : 2003 (161) E.L.T. 598 (Tri. -Kol.) duty demand cannot be confirmed against the assessee only on the basis of the Railway Receipts without corroboration from some other evidence, that same view has been taken by the Tribunal in the case of Hira Enterprises and Others v. Commissioner of Central Excise, Belgaon reported in , that the above two judgments are in respect of the cases where the railway receipt under which consignments had been booked by the railways were available, while in the present case, the allegation of duty evasion is based only on the entries in the notebook being maintained by Shri Manoj Gupta, which according to him are the Railway Receipts Numbers, but the railway receipts have not been obtained from railway booking office, that the cross -examination of Shri Manoj Gupta also does not support the Department's case, that while imposing penalty under Rule 26 of the Central Excise Rules, 2002 on Shri Harish Kumar Makhija and Shri Hira Lal Makhija, the Commissioner has not discussed at all as to how and on the basis of which evidence, the provisions of Rule 26 of the Central Excise Rules are attracted, as in terms of the Rule 26 of the Central Excise Rules penalty is imposable on a person who has acquired possession of or is engaged in purchase, sale, storage, transportation or in any other manner dealing with any excisable goods which he knew or had reason to believe are liable to confiscation, that just because according to the Commissioner's finding, RPPL is a dummy front company controlled by Shri Hira Lal Makhija and Shri Harish Kr. Makhija, the penalty equal to the duty demand confirmed cannot be imposed on them by invoking Rule 26 of the Central Excise Rules, that as regards, confiscation of the currency recovered from the residential premises of Shri Babu Lal Makhija - Delhi and the residential premises of Shri Harish Kumar Makhija - Kanpur, the burden of proving that this currency represents the sale proceeds of illicitly cleared goods is on the Department while absolutely no such evidence has been produced and that in view of the above submissions, the impugned order is not sustainable.

(3.)SHRI Pramod Kumar, ld. Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that the Department's case of duty evasion against RPPL is not based only on the entries in the notebook, recovered from the residential premises of the railway booking agent Shri Manoj Gupta, that the entries in the notebook of Shri Manoj Gupta have to be read with the statement of Shri Manoj Gupta, according to which these entries represent the details of the consignments of 'Kimti' Brand Gutkha booked through railways, that Shri Manoj Gupta has clearly stated that these consignments had been received from the factory premises of RPPL and in this regard, he used to get intimation on phone from Shri Sumit Kumar who used to tell the names of the consignor and also the place where the consignments are to be transported on delivery to self -basis, that as per the statement of Shri Manoj Gupta, it is Shri Sumit Kumar who was making the payment for transportation in cash, that the Manoj Gupta has not retracted his statement, that in view of this, not making inquiry with Shri Sumit Kumar is not fatal to the case, that the statement of Shri Manoj Gupta and the documents recovered from his residence have to be looked at in the background of the facts that huge amount of currency Rs. 17,64,870/ - from the premises of Shri Hira Lal Makhija and Rs. 19 lakh from the premises of Shri Harish Kumar Makhija had been found for which the explanation given by them is not satisfactory at all, and that in the factory of RPPL at the time of officer's visit, there were excess stock of Supari to extent of 259.50 kg, excess stock of Gutkha to extent of 690.2 kg and excess stock of lamination to the extent of 4039 kg. He also pointed out to the seizure of four bundles containing 100 kg of 'Kimti' Brand lamination from the godown of M/s. Vintage Packaging Factory, Najafgarh in respect of which its Director, Shri Amit Sood admitted that this quantity had been cleared without any invoice. He also pointed out to the statements dated 27 -9 -2004 of Shri Neelam Singh Chauhan proprietor of M/s. Durga Trading Company, who stated that they were supplying supari to RPPL for which Shri Hira Lal Makhija or Shri Prabha Shankar Shukla used to approach him. He also pointed out to the fact that inquiry with Shri Prabha Shankar Shukla and Shri Kishan Lal Sonwani, the Directors of RPPL indicated that they were only the dummy directors and the company was actually being controlled by Shri Hira Lal Makhija and Shri Harish Kumar Makhija and for this reason the Commissioner has rightly imposed deterrent penalty on both these persons. He, therefore, pleaded that there is no infirmity in the impugned order.
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