Judgment:
1. This order will dispose of four appeals filed by the appellants bearing Nos.E/2181/98-NB, E/2178/98-NB, E/1927/98-NB and E/2022/98-NB.All these appeals arise out of common order in original dated 27th April 1998 passed by the Commissioner of Central Excise, Delhi as adjudicating authority. He through this impugned order had confirmed the duty demand of Rs.61,73,803/- on appellant No.1 the company, M/s.
Prince Gutaka Ltd. (hereinafter referred as M/s. PGL Company)] and imposed penalty of Rs.30 lakhs on them. He had also imposed penalty of Rs.10 lakhs on the Managing Director of this company, Shri Hari Bhai Lalwani (Appellant No.2) and of Rs.5 lakhs on Sunil Kumar Khanna (Appellant No.3) under Rule 209-A of the Rules. The Commissioner had also ordered the confiscation of the vehicle with the option to the owner (Shri Om Prakash Tolani, Appellant No.4) to get the same redeemed on payment of redemption fine of Rs.50,000/-. He had further ordered the confiscation pan masala and raw material found lying in the factory premises with option to get the same redeemed on payment of redemption fine of Rs.5000/- and Rs.25000/- respectively by the owner. Similarly, the plant and machinery had been also ordered by him to be confiscated with option to the owner to get the same redeemed on payment of redemption fine of Rs.3 lakhs.
2. The facts giving rise to these appeals may briefly be stated as under: 3. M/s. PGL Company were engaged in the manufacture of pan masala under the brand name "prince" and "yamu". The company had two manufacturing units one located at Noida and the other at village Dallupur both registered with the Central Excise Dpartment, but the company was found running another unit at F-42, Jawahar Park, Laxmi Nagar, Delhi where they were indulding in the manufacture of pan masala under the same brand name and were clearing the goods in a clanaestine manner without payment of duty. At the time of visit of that unit on the basis of intelligence, by the officers of Central Excise 16/17 workers were found working and the panchnama dated 21.10.94, the date of visit was prepared in the presence of two independent witneesses regarding the machines installed in that premises. The new material and the finished goods (pan masala) lying the premises were also seized. The supervisor of the unit Babu Bhai T.A. Could not produce any register/challan regarding the receipt of the raw material and the production of the finished goods. One worker of the factory was also found loading empty bags and rejected pouches of Prince Gutaka and Yamu pan masala in a vehicle with the help of Kesh Nath, Driver. The statement of Kesh Nath, Driver of the vehicle was also recorded who admitted the transportation of the raw material to the factory from outside and also of the finished goods from the factory to the market. The photographs of the machines installed in the premises were also taken. The statement of K.Soman who was found working in the factory at that time as operator was also recorded wherein he stated that he was workin gin PGL company since 1989 and the said company had installed ten machines int he factory premies. He further deposed that he was transferred by the company from the Noida Unit to the unit at Laxmi Nagar. He also stated that the overall work of the factory was being looked after by Shri sunil Kumar Khanna (appellant NO.3) who was employee of the company PGL. The ledger, loose sheets and other documents including identity cards, calendar diary, rough notes etc. were also seized from his room.
On these very lines statement of Babu Bhai T.A. who was found working as supervisor in the factory at that time, was also recorded. He too admitted that he was employee of the company PGL and ten machines were installed i the factory by Sunil Kumar Khanna (appellant No.3) and that no account of the material received and the goods manufactured was maintained.
4. Thereafter statement of Shri P.C. Pathak, Director of the PGL company was also recorded. The statement of Hari Bhai lalwani (appellant No.2) who was then Managing Director of the company PGL was also recorded whrein he, however, denied that the unit at Laxmi Nagar was being run by his company PGL for the manufacture of pan masala.
Sunil Kumar Khanna (appellant No.3), in his statement admitted that this unit at Laxmi Nagar was being run by him. He denied that it was the unit of the company PGL. The statements of the officers of the companies M/s. Flex Pouches Fill (P) Ltd. and M/s. Techno Fill (P) Ltd. who sold the machines found fitted in the unit at Laxmi Nagar, Delhi to the company PGL were also recorded and the machines were got identified from those officers by showing them the photographs.
5. After completion of the investigation show cause notice dated 6.4.95 was served on all the appellants wherein all the above referred facts were detailed and documents relied upon were also mentioned. All the appellants contested the correctness of that notice. The company PGL and its Managing Director Hari Bhai Lalwani, denied their concern with the unit found manufacturing pan masala at Laxmi Nagar at Delhi under their brand name "Prince" and "Yamu" and further avered that they had already filed civil case against Sunil Kumar Khanna (appellant No.3) for misuing their brand name. Sunil Kumar Khanna (appellant No.3) in his reply, however, admitted that the unit was owned by him individually. He denied the concern of the company PGL with that unit.
He also avered that earlier he worked with the company PGL but he left the job in December 1992. He also alleged that the premises in which the unit was being run was taken on rent by him from Usha Butta of Darya Ganj on monthly rent of Rs.2000/-. Regarding the telephone installed in the factory belonging to Hari Bhai Lalwani, he explained that the bills were being paid by him personally and that he got this telephone from Shri Hari Bhai Lalwani on request. Similarly, Om prakash Tolani (appellant No.4) owner of the vehicle denied his knowledge about the clandestine removal of the goods. He only alleged that he gave his truck on hire to Sunil Kumar for transporting the raw material and the finished goods. He also stated that he had been giving his truck on hire to the company PGL also sometimes for transportation of the goods.
6. The Commissioner, however, did not agree with the version of the appellants and passed the impugned order against them as detailed above.
9. The learned counsel for the appellants has contended that there was no material and legal evidence on the record to hold that the unit at Laxmi Nagar, Delhi manufacturing pan masala was owned and run by the company PGL ;and its Managing Director, appellant No. (1) and (2). The statements of the witnesses and the documents relied upon by the Commissioner in the impugned order against these two appellants were not only inadmissible evidence but also inconclusive to prove their involvement in the manufacture and removal of the pan masala without payment of duty. He has further contended that reply to the show cause notice furnished by these as well as by the other appellants Nos. (3) and (4). had been wrongly ignored by the Commissioner. Therefore, the impugned order deserves to be set aside.
10. On the other hand, the learned SDR has reiterated the correctness of the impugned order of the Commissioner.
11. The company PGL was, no doubt, engaged in the manufacture of pan masala under the brand names of "Prince" and "Yamu", but the company had two units for manufacturing these goods one located at Noida and the other at Village Dallupur and both these units were registered with the Central Excise. These facts are evident even from the show cause notice itself.
12. The show cause notice issued to the company PGL (appellants No.1) and the Managing Director was on the allegations that the unit detected manufacturing the pan masala under the brand names "Prince" and "Yamu" at Laxmi Nagar, Delhi was owned by them and they were liable to pay the duty and the penalty as they had been clearing the goods from that unit without payment of excise duty. For holding that these allegations stood proved against them the Commissioner had relied upon the evidence consisting of statements of Babu Bhai T.A., K. Soman, R.C. Rastogi, B.R. Thapalyal, certain documents recovered from the room of K. Soman and installation of telephone belonging to Hari Bhai Lalwani (appellant No.2) at the factory premises, but this entire evidence if scanned thoroughly keeping in mind the version furnished by the appellants in their reply to the show cause notice and the other material on record, it becomes quite evident that the conclusion arrived at by the Commissioner against the company OGL (appellant No.1) and the Managing Director, Hari Bhai Lalwani (appellant No.2) cannot be legally sustained.
13. According to the allegation in the show cause notice Babu Bhai T.A.was found working as supervisor while K. Soman as operator in the factory at the time of search and they both admitted that they were in fact employees of the company PGL and the manchines in the factory premises were installed by that company and that Sunil Kumar Khanna (appellantg No.3) who was overall incharge of the factory was also an employee of that company. They also allegedly admitted that the goods were being manufactured and cleared without maintaining any record and without payment of duty. But statements of both these persons could not be legally used against the company PGL (appellant No.1). Their statements were recorded at the back by the company during the investigation and none of them was produced for cross-examination for testing their veracity. The Commissioner could not accept the authenticity of their statement when they failed to submit themselves for cross-examination for questioning the correctness of the same. No aid from the provisions of Section 9-B of the Central Excise Act could be taken by the learned Commissioner for admitting the statements of these witnesses into evidence as that Section had no applicability to this case at all, being applicable only in the event of prosecution or for provding any offence under the Act and only in those situations the statements of the witnesses could be used even if they were dead or could not be found or were incapable of giving evidence. But the adjudication proceedings could not be treated at bar with the prosecution. Therefore, without producing both the witnesses named above for cross-examination during the course of adjudication , their statements could not be legally used against the company PGL and the Managing Director (appellant No.2).
14. Besides this, the evidence adduced by the company PGL to show that both these witnesses though at one time remained in their employment, but later on left the job, had been not all considered by the Commissioner. According to the company, Babu Bhai T. A. resigned from the company in February 1994. They had produced a copy of the letter of his resignation on the record. The intimation regarding his resignation was even sent by the company to the Commissioner (Provident Fund) alongwith the statement of Provident Fund Return filed by them for the month of March 1994. Even in the attendance register Babu Bhai T.A. was marked present only upto 13.2.94 and an intimation of his having left the job was sent to the ESI authorities in the half yearly returns for the period October 1993 to March 1994 The copies of the attendance register and of the letter addressed to ESI authorities had been placed on record by the company PGL. Similarly K Soman resigned from the company PGL on 11.7.92 as is evident from the copy of the letter of his resignation which is at page 86 of the Paper Book. He was never marked present in the attendance register after that date.
15. The fact that both these persons were still found in possession of identity cards of the company and the cards issued by ESI at the time of recording their statements and taking search of the room of K Soman, could be attached much legal value, when there was overwhelming evidence referred to above, to prove that they left the company PGL (appellant No1) long back from the date of visit of the Excise staff to the factory at Laxmi Nazgar where they were found working on 21.10.94.
Shri Sunil Kumar Khanna (appellant No.3) who was admittedly overall incharge of the factory at Laxmi Nagar Delhi, never admitted that these two person were not his employees but of the company PGL (appellant No.1). Therefore, in view of all these facts and circumstances the statements of both these witnesses that they were still employees of the company PGL though working in the factory of Sunil Kumar Khanna at Laxmi Nagar at Delhi, could not be taken as a gosspil truth at all and attached any authenticity and sanctity.
16. Even the documents allegedly recovered from the room of K. Soman which had been detailed in para 13 of the show cause notice did not in any manner advance the case of the Revenue against the company PGL (appellant No.1) and the M.D., Hari Bhai Lalwani (appellant No.2). The documents recovered were pocket ledger (Ex.1), calendar diary of the year 1992, slip pad(Ex.3), rough notes (Ex.4), loose sheets (Ex.7), voucher pad (Ex.8), Bank pass book(Ex.9), identity card issued by ESI(Ex.6), loose sheets (Ex.10), but none of these documents contained any reference about the supply of the raw material by the company PGL (appellant No.1) to the factory of Sunil Kumar Khanna or receipt of finished goods from that factory by the company. In the pocket ledger, calendar diary, slip pads, rough notes, voucher pads and loose sheets, K. soman only made his personal entries regarding the joining of his these documents showed any involvement directly or much less indirectly of the company PGL in the manufacture and clandestine removal of the goods at the factory in question at Laxmi Nagar. The recovery of two identity cards one issued by the company PGL and the other by the ESI to K. Soman also did not in any manner prove the involvement of the company PGL (appellant No.1). He was admittedly ex employee of the company and during his service he was issued identity card by the company. The ESI card was also given to him as the issuance of the same was compulsory. He left the company on 11.7.92 after submitting his resignation and an intimation regarding his resignation was sent to the ESI authorities as well as to Commissioner (Provident Fund) as discussed. There is nothing on the record to suggest that he evem worked in the company PGL after 11.7.92. No document whatsoever had been produced by the Revenue in that regard. Even in the attendance register he was never marked present after that date, as is evident from all the entries of that register placed on file. Therefore, by retaining the identity card of the company and of the ESI, after leaving the job he could not be said to be still an employee of the company PGL (appellant No.1). None of the entries in the loose sheets, slip pads or other documents, detailed above recovered from his room also contained any reference about his employment directly or even indirectly in the company PGL (appellant No.1) 17. Similarly, much reliance could not be placed on the statements of K,R, Thapalya of M/s. Flex Pouches (P) Ltd. and R.C. Rastogi of M/s.
Techno Fil (P) Ltd. for holding that the machines found installed in the factory premises at Laxmi Nagar were the same which were sold by the companies of these witnesses to the company PGL (appellant No.1) Both these witness did not themselves supervise or see the installation of the machines in that factory. They were shown only photographs of those machies and they could identify only one or two machines, Shri R.C. Rastogi in his statement only stated that only one machine had monogram of his company and not others and further deposed that possibility of the other parties procuring the same types of name plates on the machines from outside could not be ruled out. Slmilarly, Shri K.R. Thampallya also stated that from the photographs of the machines shown to him, name name plate on only one was visible and not on others. Therefore, from the statements of these witnesses the identity of the machines could not be established to be the same which their respective companies sold to the company PGL (appellant No.1).
The company PGL (appellant No.1) and and its managing Director Hari Bhai Lalwani (appellant No.2) both had categorically denied the sale, transfer of any machine from their factory units at Noida and Dallupur, to the factory of Sunil Kumar Khanna at Laxmi Nagar. Their denial could not be brushed aside lightly as done by the Commissioner for want of any cogent evidence to rebut the same.
18. Another piece of evidence by which the Commissioner appears to had been influenced while passing the impugned order against the company PGL (appellant No.1) and its M.D. Hari Bhai Lalwani (appellant No.2) was the installation of the telephone belonging to Hari Bhai Lalwani, in the factory premises in question at Laxmi Nagar, Delhi. But the explanation offered by Hari Bhai (appellant No.2) for giving his residential telephone to Sunil Kumar Khanna at the premises at Laxmi Nagar had been altogether ignored wrongly by the learned Commissioner.
He is his statement has categorically stated that Sunil Kumar Khanna being the ex employee of the company was on visting terms with him and he on a request allowed him to use his telephone. There is nothing on the record to suggest that he had after shifting of telephone to the premises of Sunil Kumar Khanna ever paid the telephone bills. Rather, the bills were in fact paid by Sunil Kumar Khanna himself after he got the telephone installed in the premises at Laxmi Nagar. He Himself even so avered in reply to the show cause notice during the adjudicating proceedings. Therefore, mere use of telephone of Hari Bhai Lalwani, the M.D. of the company PGL by Sunil Kumar Khanna (appellant No.3) did not in any manner warrant the conclusion that the said company PGL and its Managing Director both were involved in the running of the factory by Sunil Kumar at Laxmi Nagar.
19. There is not an iota of evidence on the record to prove that the premises F-42, Jawahar Park, Laxmi Nagar, Delhi where the factory in question was found to be indulging in the manufacture and clandestine removal of the pan masala, was owned or taken on rent by the company PGL or its M.D. Hari Bhai Lalwani (appellant No.2). No proof in this regard had been brought on record by the Revenue. Rather the persual of the show cause notice itself shows that the factory premises belonged to Smt. Usha Bhutta and her statement was recorded during investigation by the Excise staff. She in her statement did not support the case of the Revenue at all. She rather stated that the premises were taken on rent of Rs.2000/- per month from her by Sunil Kumar Khanna and she was getting the rent from him only. She denied the nature of the work being carried out in her premies. Her statement could not be at all ignored being of independent witness.
20. There is also no material on record to prove that the raw material was being supplied to Sunil Kumar Khanna (appellant No.3) in that factory by the company PGL and its Managing Director Hari Bhai Lalwani (Appellant No.2) or that they were getting back the finished goods from Sunil Kumar Khanna. No proof of their consent to Sunil Kumar Khanna for using their brand names "Prince and "Yamu" for the manufacturing the pan masala, had been also brought on record by the Revenue. Shri Hari Bahi, MD (appellant No.2) had categorically denied that he or his company PGL had ever given written or oral consent to Sunil Kumar for using their brand names. Sunil Kumar had himself also not admitted that he was authorised by them to use their brand names on the pan masala.
Rather the company PGL (appellant No.1) and M.D. Hari Bhai Lalwani (appellant No.2) had also in their reply to the show cause notice alleged, that they had already taken civil proceedings against Sunil Kumar Khanna for recovery of the damages on account of misuse of their trade names and this fact has remained controverted on the record.
21. The statement of Kesh Nath, Driver-cum-Helper of the vehicle No.DL-IL-3075 which was seized during investigation also did not in any manner help the revenue for connecting the company PGL (appellant No.1) and its M.D. Hari Bhai Lalwani (appellant No.2) with the manufacture and clandestine removal of the goods, pan masala manufactured by Sunil Kumar Khanna at the factory at Laxmi Nagar, Delhi. He only deposed that he had been transporting the goods manufactured by Sunil Kumar Kumar Khanna in the factory for, delivery to one Sharma, Dealer at Chuna Mandi, Pahar Ganj. He categorically denied his knowledge about the source from where the raw material was being received by Sunil Kumar Khanna for the manufacture of pan masala. The dealer, Mr. S,P, Sharma, partner of M/s. S.P. Sharma and Bros. also in his statement recorded on 24.10.94 did not state that the goods (pan masala) were supplied to him by Sunil Kumar Khanna from the factory at Laxmi Nagar, Delhi, on behalf of or at the instance of appellants no. (1) & (2). Therefore, the fact that the same truck on certain occasions was being taken on hire by the company PGL (appellant No.1) for transportation of the goods to their dealers could not be made basis for attributing knowledge and its involvement in the manufacture of pan masala by Sunil Kumar Khanna.
Even the learned Commissioner in the impugned order himself has observed that there was no evidence on record to prove that Shri Om Prakash Tolani (appellant No.4) owner of the truck had the knowledge that his truck was being used for transporting the contraband goods.
22. Sunil Kumar Khanna (appellant No.3) had very candidly admitted that he alone was indulging in the manufacture and clandestine removal of the pan masala without payment of duty, under the brand names "Prince" & "Yamu". He did not dispute his liability for the payment of the excise duty. He in his statement recorded on 16.11.94 reiterated this very fact and gave the full details as to when and how he started his factory after getting the premises on rent from Smt. Usha Bhutta, the landlady. He also disclosed the names of the workers including that of Babu Bhai T.A. and K. Soman, employed by him in the factrory. He himself, as stated by him, was ex employee of the company PGL (appellant No.1) as he remained during the year 1990 to 1992 as salesman in the office of the company at Pune. He had denied that after leaving the job in December 1992 he was ever re-employed by the company PGL (appellant No.1). His denial has been, however, doubted by the Commissioner, as is evident from the impugned order, on the ground that he was found present at the time of raid on another unit of the company on 21.10.94 and there he made a statement that he had come to the factory with Hari Bhai Lalwani and was collecting salary from his house. But even from his that statement it could not be legally inferred that he was employee of the company PGL for want of evidence to corroborate the same. There is nothing on the record to prove that in any record of the company PGL, he was shown as an employee after December 1992, when he left the job.
The statement of Prakash Chand Pathak, Director was also recorded and he in his statement nowhere admitted that the employment of Sunil Kumar Khanna in the company and disbursement of salary to him after December 1992. There is also nothing on the record to suggest if any discrepancy in the raw material or the finished goods was detected or found by the Excise staff at the time of xxxx checking the record of the two units one at Noida and the other azt village Dallupur, of the company PGL (appellant No.1). No document whatsoever was also found showing any link or connection of the PGL company with the factory of Sunil Kumar Khanna at Laxmi Nagar, the raw material, finished goods and machines seized during checking from the factory premises and confiscated by impugned order.
22. In the light of the discussion made above and the material brought on record, it does not at all stand proved that the unite at Laxmi Nagar, Delhi found manufacturing pan masala, was owned and controlled by the company PGL (appellant No.1) and its M.D. Hari Bhai Lalwani (appellant No.2). Rather it stands established that the said factory was in fact owned and run by Sunil Kumar Khanna (appellant No.3) who even himself did not dispsute this fact. Therefore, no duty demand could be confirmed against the company appellants No. (1). The duty could be demanded and confirmed only against Sunil Kumar Khanna (appellant No.3) who even himself admitted of having induldged in the manufacture and clandestine removal of the excisable goods (pan masala) without payment of duty during the period in question. But no such demand was made from him in the show cause notice. He was proposed, in that notice, to be proceeded against any under rule 209-A of the Rules.
23. Since no duty demand could be raised and confirmed against appellants (1) under Rule 9(2) of the Rules read with Section 11-A of the Central Excise Act, as discussed above, no penalty under Section 173-Q on the company PGL (appellant No.1) as well as on its Managing Director Hari Bhai Lalwani (appellant No.2) under Rule 209-A of the Rules could be legally imposed by the Commissioner. Therefore, the impugned order against both these appellants deserves to be set aside.
24. Against Om Prakash Tolani (appellant No.4) the learned Commissioner had ordered the payment of redemption fine of Rs.50,000/- by him for getting the seized vehicle released. But such an order could not be passed when the Commissioner himself had observed at page 32 of the impugned order, that there was no evidence to prove that Om Prakash (appellant No.4) had the knowledge that his truck was being used the transport of contrabad goods as he only used to give the truck on hire.
Therefore, the impugned order of the Commissioner against him cannot be sustained.
25. In the light of the discussion made above, the impugned order of the Commissioner against appellants No.(1), (2) and (4) is set aside while against appellant No.(3), Sunil Kumar Khanna, is upheld regarding penalty, confiscation of machines raw material and finished goods seized from his factory and imposition of redemption fine on him.
Accordingly the appeal Nos.E/2181/98- NB,E/2178/98-NB and E/2022/98-B of appellants Nos.(1), (2) (4) respectively are allowed with consequential relief, if any permissible under the law while appeal No.E/1927/98-NB of Sunil Kumar Khanna (appellant No.3) is accordingly dismissed.