[Order per : P.S. Bajaj, Member (J)]. - The above captioned appeals have been filed by the appellants against the common order-in-original dated 31-10-2001 vide which the Commissioner had confirmed duty and penalty against the company appellant No.1 and also imposed penalties on the other appellants, as detailed therein.

2. The company appellant No. 1 is engaged in the manufacture of pan masala with and without tobacco. Their premises were raised by the central excise officers on different dates. It was noticed that 6 bags of pan masala, gutkha were being removed on two rickshaws, 17 bags of pan masala and gutkha were found excess over and above the RG-I stock. 367.984 kgs. of gutkha, 70.6 kgs. of sada masala and 5859.9 kgs. supari, were found short. On examining the documents resumed from the premises of the appellant No. 1 company, it also came to light that 74 bags and 496 packets of Pukar gutkha, had been removed without payment of duty and the details of which were available in 16 loose slips. Another 40 bags of Pukar gutkha were also found to had been removed through M/s. Narain Transport & Forwarding Agency in contravention of the central excise rules. It also revealed that Trade Tax authority intercepted 64 bags of pan masala/gutkha. In follow up action, the premises of M/s. U.P. Marketing, owned by appellant No. 2 Udey Chand Chaurasia, being proprietor and of M/s. R.P. Products, proprietorship concern of Raj Kumar Chaurasia, appellant No. 3, were also searched and certain documents were resumed. The residential premises of Pankaj Chaurasia, appellant was also searched. No stock register was found to had been maintained by M/s. R.P. Products and U.P. Marketing. The statements of proprietors of both these concerns i.e. appellant Nos. 2 and 3, were recorded. Both these firms were found trading in the raw materials viz., supari, katha, compounds, perfumes etc. These firms were supplying raw materials to the company appellant No. 1. On physical checking of the stock lying in the premises of both these firms and of comparing the same with the record, the stock of supari and other raw material were found short and for which no explanation was offered by the appellant Udey Chaurasia and his son Raj Kumar Chaurasia. Shri Udey Chaurasia allegedly admitted the supply of the supari found short in the stock, to the company appellant No. 1. On completion of the investigation, show cause notice to the company appellant No. 1 as well as to the appellant Nos. 2 and 3 being proprietor of M/s. U.P. Marketing and R.P. Products, respectively and appellant Pankaj Chaurasia, owner of the premises, were issued. The show cause notices were also issued to the appellants Nos. 5 and 6, authorised signatories of the company appellant No. 1 and to appellant No. 7, being accountant of that company vide which the duty demand of the disputed amount was raised from the company appellant No. 1 and penalty was also proposed to be imposed on other appellants. After getting their reply wherein they denied the allegations as contained in the show cause notices, the Commissioner passed the impugned order vide which he had confirmed the duty along with the penalty and interest on the company appellant No. 1 and imposed penalty on the other appellants under Rule 209A of the Central Excise Rules.

3. The learned Counsel has contended that there is no cogent, convincing and concrete evidence on record to prove the actual receipt of the unaccounted supari as raw materials for the manufacture of pan masala, by the appellant No. 1, from the firms named above, owned by the appellant Nos. 2 and 3 and thereafter manufacture of the final products i.e. pan masala simple and pan masala with tobacco, by the company and removal of the same without payment of duty. The statement of appellant No. 2, on the basis of which the Commissioner has confirmed the duty demand and imposed penalty, has been misread by the Commissioner, as there was no admission on his part regarding the clandestine supply of the raw material i.e. supari, by his firm M/s. U.P. Marketing and by the firm R.P. Product, owned by the appellant No. 3, to the company appellant No. 1. The impugned order, according to the Counsel, has been passed only on conjectures and surmises and as such, deserves to be set aside.

4. On the other hand, the learned SDR has reiterated the correctness of the impugned order.

5. We have heard both the sides and gone through the record.

6. The bare perusal of the impugned order shows that the duty of Rs. 4,64,56,058/- had been affirmed on the company appellant No. 1 on account of shortage of 364843.3 kgs. of supari found in the stock of the firm M/s. U.P. Marketing and R.P. Products, owned by the appellant Nos. 2 and 3 respectively, during the period 1-4-98 to 4-9-2000. Regarding this shortage, the statement of Udey Chaurasia, appellant No. 2 was recorded and on the basis of his statement, the learned Commissioner has presumed the clandestine receipt of the supari from the above said two firms and manufacture of pan masala with and without tobacco, out of that supari and removal of the same without payment of duty by the company appellant No. 1. The other facts which had influenced the learned Commissioner for passing the impugned order are that the company appellant No. 1 as well as other two firms M/s. U.P. Marketing and R.P. Product were being managed and run by Shri Udey Chaurasia appellant No. 2 and his other family members as the common employees were working for these concerns and that the entire affairs of the company appellant No. 1 were within the knowledge of the appellant No. 2 alone.

7. But from the bare perusal of the show cause notice notices, we find that no allegation that firm M/s. U.P. Marketing and R.P. Product were only dummy firms flouted by the company appellant No. 1, had been raised. No case for clubbing the clearance of both these firms with that of the company appellant No. 1, has been made out in the show cause notice. Therefore, the fact that these concerns were being run by the inter se related persons, could not be given any weight for concluding that the supari found short in the stock of two trading firms viz. U.P. Marketing and R.P. Product, owned by the appellant Nos. 2 and 3, must have been utilized by the company appellant No. 1 for the manufacture and clandestine removal of the pan masala with and without tobacco.

8. Shri Udey Chaurasia, appellant No. 2 had nowhere, in his statement, admitted in clear terms that the supari found short in the stock of his firm and that of his son appellant No. 3, were transferred or sold to the company appellant No. 1, during the disputed period i.e., 1-4-98 to 4-9-2000. His statement relied upon and referred in the impugned order and Commissioner’s own observations in consequence thereof, reads as under :-

“In the statement dated 13-9-2000, in response to a question, Shri Udai Chand Chaurasia admitted that if the reconciliation is not achieved in the stock of supari on comparison of sales and purchase bills then it might have gone to Durga Trading Co. or R.P. Products. Since the stock of supari in R.P. Products is already found short, it can safely be inferred that it had gone to Durga Trading Co.”

From this statement of Udey Chand Chaurasia, we are unable to persuade ourself to accept that there was clandestine supply of the supari by his firm M/s. U.P. Marketing or by M/s. R.P. Product to the company appellant No. 1. The observations of the Commissioner that “since the stock of supari in the R.P. Product was already found short, it could be safely inferred that it has gone to Durga Trading Company, (appellant No. 1)” cannot be said to be well founded. Such an inference could not be legally drawn by the learned Commissioner without seeking corroboration from the other evidence. No document whatsoever was resumed from the office of M/s. U.P. Marketing or R.P. Product, owned by the appellant Nos. 2 and 3 regarding supply of the supari to the company appellant No. 1, in a clandestine manner. Similarly, no document was recovered from the premises of the company appellant No. 1 about the receipt of the quantity of supari found short in the stock of above referred two firms owned by the appellant Nos. 2 and 3. No record regarding excess electricity consumption during the period in dispute by the company appellant No. 1 for clandestine manufacture of the pan masala out of clandestine receipt of the supari from the above referred firms, had been also brought on record. There is also not an iota of evidence to prove clandestine clearance of pan masala with and without tobacco by the company appellant No. 1, to the buyers/consumers. No statement of any buyer/consumer, had been recorded in that regard. Under these circumstances, from the uncorroborative, indefinite and inclusive statement of Udey Chand Chaurasia, appellant No. 1, that if the reconciliation was not achieved in the stock of supari on comparison of sales and purchase bills, then it might have gone to the company appellant No. 1, no inference could be drawn legally for holding the company appellant No. 1 guilty of receipt of supari in clandestine manner, thereafter manufacture and clearance of pan masala out of that, without payment of duty.

9. It is well settled that the charge of clandestine manufacture of the dutiable goods and removal thereof without discharging the duty liable by an assessee, cannot be established on assumptions and presumptions. Such a charge has to be based on concrete and tangible evidence. In this context, reference may be made to Oudh Sugar Mills Ltd. v. Union of India - 1978 (2) E.L.T. (J 172) (S.C.), wherein the Apex Court has observed that demand of duty cannot be raised on the strength of assumptions and presumptions. There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. This very principle of law had been applied by the Tribunal in a number of cases and out of those, few are, Amba Cement and Chemicals v. CCE - (Tribunal) = 2000 (90) ECR 265, Gurpreet Rubber Industries v. CCE - and Madhu Foods Products v. CCE - .

10. For want of any legal, tangible and concrete evidence, the duty demand of Rs. 4,64,56,058/- as confirmed by the learned Commissioner along with equal amount of penalty and interest, against the company appellant No. 1, cannot be legally sustained and is set aside.

11. However, the confirmation of demand of Rs. 11,520/- on account of removal of 6 bags of pan masala valued at Rs. 28,800/- along with penalty of equal amount as well as duty demand of Rs. 38,735/- on account of shortage of 367.984 kgs. of gutkha found short in the factory premises of company appellant No. 1 along with, equal amount of penalty, has not been contested before us, by the learned Counsel for the appellants and as such, the same are upheld. Similarly, learned Counsel has not disputed the confirmation of demand of Rs. 7,432/- on account of shortage of 70.6 kgs of simple pan masala, found in the factory premises of appellant No. 1 along with equal amount of penalty and as such, the same is also upheld. The learned Counsel has also fairly not disputed the confiscation of 17 bags of pan masala, valued in all Rs. 80,700/- and appropriation of security amount of the company appellant No. 1 deposited at the time of provisional release of the goods and imposition of penalty of the same amount. The confirmation of demand of Rs. 1,48,032/- and Rs. 76,800/- (since debited) with equal amount of penalty, has been also not challenged before us and as such, the same is upheld. Therefore, the amounts of all the above referred confirmed demands, shall be adjusted from the duty amount already deposited by the company appellant No. 1.

12. However, the imposition of penalty of various amount, as detailed in the impugned order itself on appellant Nos. 2 to 7 by the learned Commissioner, cannot be legally sustained for want of any evidence to prove the ingredients of Rule 209A of the Central Excise Rules under which the penalty had been imposed. The role of these appellants had not been discussed for holding them guilty under the said rule. Therefore, the penalty on all these appellants is set aside.

13. In view of the discussions made above, the impugned order of the Commissioner is modified in the above said terms. The appeals of the appellants accordingly are partly allowed with consequential relief, permissible under the law.