A. RAVINDRAN Vs. CCE

JUDGEMENT

(1.) THE Commissioner of Central Excise, in the impugned order, demanded duty of over Rs. Two Crores from M/s. A. Ravindran [Appellant in Appeal No. E/172/05] in respect of 'Pasu' -Branded Chewing Tobacco found to have been cleared by them without payment of duty during the period 1997 -98 to 2001 -02, by invoking the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act. He imposed equal amount of penalty on them under Section 11AC of the Act. He also imposed penalties ranging from Rs. 10,000/ - TO Rs. 20 Lakhs on the appellants in the remaining appeals under Rule 209A of the erstwhile Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules 2001/2002. The chewing tobacco (branded and unbranded) seized by the investigating officers of Central Excise was confiscated under Rule 25 of the Central Excise Rules, 2001, with option for redemption against payment of a fine of Rs. 2.36 lakhs. As the goods had already been provisionally released, the fine was ordered to be appropriated from the cash security/bank guarantee furnished by the parties concerned. The vehicle found to have been used for transporting a part of the above goods was also confiscated with option for redemption against payment of a fine of Rs. 62,500/ -. As it had already been provisionally released, the fine was ordered to be appropriated from the cash security/bank guarantee furnished by the party concerned. The stay applications relate to the amounts of duty and penalties. After hearing both sides on these applications, we were convinced of the need to dispose of the appeals finally. Accordingly, after noting that M/s. A. Ravindran had paid an amount of Rs. 23.6 lakhs during the course of investigations, we have dispensed with the requirement of predeposit of duty and penalty amounts for the purpose of taking up the appeals for final hearing. We have examined the records and heard both sides in all the appeals.

(2.) SHRI . A. Ravindran is the sole proprietor of M/s. A. Ravindran [Appeal No. E/172/2005]. Shri. A.Aravindan [E/174/2005] and Shri. A. Prabakaran [E/173/2005] are his brothers. The entire family is said to be into the business of manufacturing and marketing 'Pasu' - Branded Chewing Tobacco as also trading in raw tobacco as well as unbranded chewing tobacco. They are said to be catering to the tobacco needs of the rural community in Tamilnadu, Karnataka and Kerala. M/s. A. Ravindran are registered with the Central Excise Department for the manufacture of 'Pasu' - Branded Chewing Tobacco. Shri. P. Arunachalam [E/175/2005] is the salesman of M/s. A. Ravindran. S/Shri S.Ravindran, A.Ayyasamy, K.Govindaraj and S.Raja [E/176 to 179/2005] are dealers of 'Pasu' - Branded Chewing Tobacco. On 30.07.2001, officers of DGCEI [Directorate General of Central Excise Intelligence] simultaneously visited the premises of M/s. A. Ravindran and their dealers/buyers and seized various quantities of 'Pasu' -Brand Chewing Tobacco in bags/packets/pouches. A small quantity of unbranded chewing tobacco was also seized from the premises of M/s. A. Ravindran. The aforementioned vehicle was seized from the premises of Shri. S.Ravindran. These seizures were based on a belief that the 'Pasu' brand chewing tobacco seized from the premises of M/s. A. Ravindran had been kept ready for clandestine removal and the goods seized from elsewhere had been clandestinely removed from the said premises. Various quantities of raw materials [including raw tobacco] were also found in the premises of M/s. A. Ravindran and the same were recorded in the relevant mahazars. Statements were recorded from Shri. A. Ravindran and his brothers, agents and suppliers of raw materials. On the basis of the results of investigations so far made, the Department issued a Show Cause notice dated 29.01.2002 to all the appellants barring Shri. A.Aravindan and P.Arunachalam. This notice proposed confiscation of the seized chewing tobacco, recovery of duty of Rs. 1,62,867/ - on the said goods, and imposition of penalties. After issuing this notice, DGCEI conducted further investigations and, based on the results thereof, issued a second show -cause notice dated 19.04.2002, which demanded a further amount of duty of Rs. 1,99,90,132/ - from M/s. A. Ravindran on branded chewing tobacco allegedly manufactured and cleared without payment of duty by them during the period April 1997 to July 2001 and also proposed to impose penalty on them under Section 11AC of the Central Excise Act and under various Central Excise Rules. This notice also proposed to appropriate an amount of Rs. 23,61,930/ - already paid by the party, towards the demand of duty. It also proposed penalties on other appellants. This notice invoked the extended period of limitation. The appellants, in their replies to Show Cause Notices, denied the allegations leveled against them. They also cross -examined several of the witnesses, whose statements had been recorded by DGCEI and relied on in the Show -cause notices. They also adduced documentary evidences to rebut some of the allegations raised in the Show cause notices. The adjudicating authority heard the Counsel for the appellants and passed the impugned order.

(3.) LD . Counsel for the appellants submitted that the Commissioner's Order was liable to be set aside on the ground of non -application of mind and claimed that the order was erroneous on numerous counts. The finding of clandestine manufacture of branded chewing tobacco, against M/s. A. Ravindran, resulted from erroneous finding of unaccounted procurement of raw material viz. raw tobacco. A quantity of over fifteen lakhs kilograms of raw tobacco was found to have been clandestinely procured from one Sivaganesh Kumar during the said period. The Commissioner also relied on certain slips recovered from Sivaganesh Kumar and statements recorded from him. The appellants submitted before the Commissioner that the slips did not indicate clearance of raw tobacco to M/s. A. Ravindran and that the actual removals of the goods were to be ascertained from the lorry bills produced by them. The total quantity of raw tobacco purchased by the family during the said period was only 3.2 lakhs kgs as evidenced by documents. For the period 1997 -98 and 1998 -99, there was no evidence of supply of raw tobacco to M/s. A. Ravindran by Shri. Sivaganesh Kumar. These facts had clearly come out through the cross -examination of Sivaganesh kumar. The Commissioner totally ignored this evidence. It was found by the adjudicating authority that about 12 lakh kgs. of raw tobacco was clandestinely procured by M/s. A. Ravindran from Andhra region during the subject period. The demand drafts issued by a bank at Thottiyam [ a place near Chinna Salem, the premises of M/s. A. Ravindran] during the material period, which were payable at Eluru [Andhra Pradesh], were treated as payments made by M/s. A. Ravindran for purchase of the above quantity of raw tobacco from Andhra region. Ld. Counsel submitted that the finding of unaccounted procurement of a substantial part (4.8 lakhs kgs) of the above raw material was not supported by any documentary evidence and was based only on statements of raw tobacco suppliers of Andhra region. These suppliers retracted their statements in the course of their cross -examination. The Commissioner rejected these retractions without any valid reason. The appellants had submitted before the adjudicating authority that the tobacco from Andhra Region was not suitable for manufacture of chewing tobacco and could be used only for making 'Cheroot', which fact was certified by the Tobacco Board, Govt. of Andhra Pradesh as also by VAOs under the State Govt. The adjudicating authority brushed aside these certificates issued by the governmental agencies. It was further submitted by Ld. Counsel that, as the family members were engaged in tobacco -related business [including trading activity], it was not correct to say that the raw tobacco procured by them from Andhra region were entirely used by M/s. A. Ravindran for manufacture of 'Pasu' Brand Chewing Tobacco. All the demand drafts were not obtained by Shri. A. Ravindran's family. This apart, demand draft details were available only for a period of 11/2 years. These aspects were not duly examined by the Commissioner. Referring to the Commissioner's finding that 74,670 Kgs of raw tobacco had been clandestinely procured by M/s. A. Ravindran from Vedaranyam, Ld Counsel submitted that this finding was not supported by any documentary evidence and was based only on statements of persons who had allegedly supplied the raw material. Yet another basis for the finding of clandestine manufacture of branded chewing tobacco was the Commissioner's finding that polybags [packing material] were procured, without accountal, by M/s. A. Ravindran, Ld. Counsel submitted that this finding was also not supported by any documentary evidence and was based only on statements of suppliers. These suppliers retracted the statements, when cross -examined before the adjudicating authority. The retractions were rejected by the Commissioner without any valid reason. With reference to retraction of statements by witnesses, Ld.Counsel contended that, in so far as a witness was concerned, the first opportunity for him to retract a statement recorded from him under coercive circumstances by the department's investigators was his cross -examination. Hence, according to Ld.Counsel, the retraction made by such witnesses during cross -examination was not to be brushed aside as belated. It was also pointed out that, even though the allegations in the show -cause notices had been framed on the basis of 64 letters and around 60 statements and the noticees' defence was well -supported by the results of 33 cross -examinations, Ld.Commissioner did not advert to the contents of such letters, statements and cross -examinations and proceeded to confirm the demand raised in the show -cause notices. Counsel submitted that the 'mountain of evidences' adduced by M/s. A. Ravindran to show that some of their customers had also dealt with duplicate 'Pasu' Brand Chewing Tobacco manufactured by unscrupulous persons was just discarded by the Commissioner. The Commissioner also relied on the statements of some transporters who had stated that they had transported 'Pasu' Brand Chewing Tobacco. But, in cross -examination, some of these transporters deposed that they did not know the contents of consignments transported by them and that their earlier statements were given as required by the investigating officers. This deposition was also rejected by the Commissioner. Almost all the witnesses who were cross -examined deposed that they had been coerced to give statements before the investigating officers. The Commissioner did not heed to these depositions. Yet another grievance raised by Ld.Counsel was that Ld.Commissioner had made unsavoury remarks against the counsel who cross -examined the witnesses.