Full Judgment
2. The appellants No. 1, M/s Globe Synthetics Ltd. (in short 'M/s GSL') is a company engaged in the manufacture of polyester yarn (texturised and drawn/twisted). They were served with a show cause notice dated 12.8.1997 alleging that they had manufactured polyester yarn during the period November 1994 to June 1995, weighing 497671.746 kgs from the POY, clandestinely received from the company, appellants No. 4 (in short 'M/s HPL') and removed the same clandestinely without entering in the statutory records, without issue of invoice and without discharging the duty liability. The penalty was also proposed to be imposed on appellants No. 2 & 3 being the Managing Director and Director (Incharge) respectively of the company, M/s GSL, who were responsible for the day-to-day affairs of the business of the company. Similarly, penalty on the company, appellant No, 4, was also proposed to be imposed for having been acquired/purchased the polyester yarn (Texturised & Drawn/Twisted) from the company, GSL during the abovesaid period with full knowledge that the same was not duty paid.
3. The appellants contested the correctness of the show cause notice.
The company, GSL, denied the clandestine manufacture and removal of the polyester yarn during the period in dispute without the costs of invoice and without payment of duty. Similarly, the company, HPL, denied the receipt of the goods from the company, GSL, in a clandestine manner. The Commissioner, however, did not accept the version of the appellants and through the impugned order confirmed the duty alongwith penalty against the company, GSL and imposed penalties of various amounts on other appellants as detailed in the impugned order itself.
4. The learned counsel has contended that there is no reliable evidence on the record to prove the clandestine manufacture of the polyester yarn by the company, GSL, out of the POY allegedly received by them from the company, HPL, appellant No. 4, during the period in dispute.
There is also no reliable evidence to prove the clandestine removal of the finished goods by the company, GSL, to the company, HPL, during the disputed period. The Impugned order has been based on inadmissible, inaccurate and insufficient testimony of Shri B.M. Gupta, the Vice-President of the company, HPL, from whom one diary and loose sheets were allegedly recovered while taking search of the factory premises of the company, HPL. The learned counsel has further contended that the evidence of Shri B.M. Gupta, could not be legally used against the appellants as he failed to submit himself for cross-examination and could not disclose the sources from where he made the entries in the diary and the loose sheets, and even there was no corroboration to his evidence from any source also. Therefore, the impugned order deserves to be set aside.
5. On the other hand, the learned SDR, has simply reiterated the correctness of the impugned order.
6. To substantiate the allegations, firstly, of clandestine receipt of POY from the company, HPL, by the company, GSL, during the disputed period and manufacture of texturised and drawn/twisted polyester yarn out of that and secondly, of the clearance that yarn clandestinely without issuing the invoices and paying the duty, to the company, HPL, the sole evidence relied upon by the revenue is the statement of Shri B.M. Gupta, who was then Vice-President of the company, HPL, and from whose factory one diary and some loose sheets were recovered. In the diary and loose sheets, Shri B.M. Gupta, is alleged to had made entries regarding the supply of POY to the company, GSL, during the disputed period in a clandestine manner. He also allegedly admitted this fact in his statement recorded on 6.7.1995. He is also alleged to had submitted chart showing the details of the entries made in the diary regarding the clearance of the goods (POY) to company, GSL and M/s Emmtex. But, in our view, his evidence carried no legal value and credence in the eyes of law and as such could not be made basis for confirmation of duty with penalty on appellant No. 1, company, GSL, and penalties on other appellants under Rule 209-A, for these reasons. Firstly; Shri B.M. Gupta, resiled from his confessional statement dated 6.7.1995 by alleging that the same was obtained under duress and coercion. He even in his affidavit filed by him with the Writ Petition filed in the Hon'ble Punjab & Haryana High Court, confirmed his retraction of the earlier confessional statement having been obtained under duress and coercion. But, thereafter he again changed his stand and stated that his earlier statement was voluntary. He had been, in fact, changing his stand regarding the maintenance of the alleged diary and the loose sheets, from time to time as and when he found convenient. Therefore, he could not be said to be a man of credence.
7. Secondly, Shri B.M. Gupta did to submit himself for cross-examination at all before the adjudicating authority, in order to test the correctness of the entries made by him in the diary and loose sheets, for the reasons best known to him. He even did not disclose any source in his statement, from where the entries were made by him in the diary and the loose sheets, on the basis of which he prepared the chart and submitted the same to DGAE Officers.
8. Thirdly, there is an iota of evidence on the record to corroborate the evidence of Shri B.M. Gupta and the alleged entries made by him in the diary and the loose sheets. Shri Rajeev Agarwal, M.D. of the company, HPL, had not even corroborated the statement of Shri B.M.Gupta. He had denied his knowledge about the maintenance of any such diary and the loose sheets at his instance by Shri B.M. Gupta.
Moreover, if the goods (POY) had been actually received by the company, GSL, from the company, HPL, the same must have been lying in their factory premises in a finished or unfinished form, but no such goods were recorded from the factory premises when search was conducted by the Officers. Similarly, no invoice or any other document showing the clandestine manufacture and thereafter removal of the polyester yarn (Texturised & Drawn/Twisted) by them to the company, HPL, was recovered, at the time of search by the Officer. No evidence had been also brought on record to prove the excess consumption of electricity, procurement of raw material and employment of excess labour by the company, GSL, for producing in a clandestine manner, the impugned goods from POY allegedly received from the company, HPL 9. In view of what has been referred to above, the uncross-examined, uncorroborated evidence of Shri B.M. Gupta and the alleged entries made by him in his diary and loose sheets, carried no legal value and were, in fact, inadmissible in evidence. The charge of clandestine receipt of POY from the company, HPL, and manufacture of the polyester yarn out of that by the company, GSL, could not be said to had been proved against the said company on the basis of that evidence. In this view, we are fortified by the law laid down in (1) Arsh Castings Pvt. Ltd. v. CCE, 1996 (81) ELT 276 and TakshIla Spinners v. CC, Chandigarh, 2001 (131) ELT 568. wherein it has been held that no reliance can be placed on the evidence of a witness who had not turned up for cross-examination during adjudication proceedings, especially when his evidence did not find corroboratfon from other evidence.
10. The learned Commissioner in the impugned order has also referred to the statements of other officials of the companies, GSL and HPL recorded during investigation and the bill/delivery challans and bill discounting documents allegedly issued by the company, GSL to the company, M/s HPL. But these documents did not categorically advance the case of the Revenue, for substantiating the allegations of clandestine receipt of raw material and manufacture of the goods by the company, GSL. Shri P.L Hazra, Financial Officer of the company, HPL, in his statement had only disclosed that the bill discounting documents found in File No. A-50 related to the purchase of the polyester yarn by the HPL from the company, GSL and SSL. To the same effect was the statement of Shri Ram Avtar Yadav, Chief Manager (Accounts) of HPL, regarding the bill discounting file, but there is nothing on the record to suggest that if these witnesses were subjected to cross-examination by the appellants. Even otherwise from the bill discounting document, no inference could be drawn that there had been clandestine removal of the goods by the company, GSL, to the company, HPL. No discrepancy in the statutory record of either of these two companies was found regarding the sale-purchase transactions of the goods. Shri Rajesh Chowdhary, Manager (Finance) of the HPL, nowhere in his statement admitted the clandestine removal of the goods by the company, HPL to the company, GSL He only deposed that most of the yarn was sold in Surat/Bombay markets. Regarding Bill of Exchange (Hundi), he submitted that he had been approaching various finance companies for short term loans. Shri Rajeev Agarwal, Joint Managing Director of the company, HPL, stated that he had been receiving all the reports coordinating the activities of the various sections of the company, but he nowhere admitted the clandestine removal of the goods by his company, HPL to the company, GSL, or clandestine receipt of the goods from GSL by the company HPL.
Similarly, Shri Rakesh Gupta, Managing Director of GSL, in his statement nowhere admitted the clandestine receipt of raw-material from the company, HPL or clearance of the finished goods by his company, to the HPL. He did not dispute his signatures on the Hundi and Invoices, but he explained that these were submitted to the finance companies for taking loans. Shri Rajeev Agarwal and Shri Rakesh Gupta, appellants on behalf of the company, GSL, denied the clandestine sale of the goods to the company, HPL The discounting bills were only submitted to the finance companies, namely, M/s Apple Industries Ltd., M/s Ashok Leyland Finance Ltd., M/s Wipro Finance Ltd. and Anagram Finance Ltd., for the purpose of taking loans and officials of these companies, namely, Shri Vivek Verma, Shri Sanjay Gandhi, and G. Srinivasan and Shri Rajan Khosla respectively have only deposed about the loans advances on the basis of the bill discounting documents to the company, HPL. None of them had uttered any word about the actual receipt of the goods by the company, HPL, from the company, GSL or from any other supplier. No evidence regarding the actual sale of the goods by the company, GSL to the company, HPL, had been brought on record. The sole evidence of Shri B.M. Gupta for proving the alleged clandestine sale and purchase of the goods between the two companies, HPL and GSL, based on his private diary and the loose sheets, as observed above, carried no legal value being inadmissible in evidence. No excess or unaccounted goods were found lying in the factory premises of either of these two companies.
No seizure of the goods was made from the factory premises of company, GSL. No incriminating document was also recovered showing clandestine sale/purchase of the raw material/finished goods between the two companies.
11. In view of the discussion made above, the impugned order of the Commissioner confirming the duty and penalty on the appellant No. 1 and imposing penalty on other appellants under Rule 209-A of the Rules, cannot be legally sustained and the same is ordered to be set aside, 12. As a result, all the appeals of the appellants are allowed with consequential relief, if any, permissible under the law.