[Order per : V.K. Agrawal, Member (T)]. - These three appeals, arising out of a common order-in-original No. 4/Commissioner/LKO/2002 by M/s. Rama Shyama Papers Ltd. and two others against the confirmation of demand of duty in respect of uncoated craft paper and imposition of penalty.

2.1 Shri K.K. Anand, learned Advocate, mentioned that M/s. Rama Shyama Papers Ltd., Appellant No. 1 manufacture uncoated craft paper; that the Central Excise officers searched their factory premises on 22-6-2001 and seized 39.681 MT of goods alleged to have been found in excess of the book balance; that the Officers also resumed certain records from the factory premises besides recording the statement of Shri Puneet Agarwal, Managing Director, statements of the driver and cleaner of Truck No. HR-29 D/1541 being loaded therein, statements of Shri Manoj Sharma, Authorised Signatory and casual workers; that the Officers also conducted search in the factory premises of M/s. Chitra Traders, Delhi on 24-6-2001 and resumed cash book and ledger besides recording the statements of Shri Ravi Kumar Mittal, Proprietor; that the premises of six transporters were also searched, certain documents were resumed and statements were recorded; that subsequently the statement of whole time Director Shri Dinesh Goyal was also recorded on 28-8-2001 and 27-9-2001; that another statement of Shri R.K. Mittal was taken on 26-9-2001.

2.2 He, further, mentioned that a show cause notice dated 22-10-2001 was issued to all the Appellants and others for demanding duty and imposing penalty; that the Appellant No. 1 had requested for cross-examination of driver, cleaner, five causal workers, five transporters and one of the Pancha (witness) and Inspectors S/Shri Anurag Sharma and Kamlesh Singh; that the Commissioner subsequently passed the impugned order confirming the demand of duty, imposing penalties on the three Appellants and confiscating the seized goods with option to redeem the same on payment of fine; that the Commissioner, however, dropped the proceedings against Shri Puneet Agarwal.

3.1 The learned Advocate submitted that one of the main issue against the Appellants is that they had effected clandestine removal of 966.259 MT of excisable goods to M/s. Chitra Traders without payment of duty during the period from 19-6-2000 to 22-6-2001 on the basis of books of account resumed from Chitra Traders; that the records resumed from Chitra Traders were manipulated; that Shri R.K. Mittal was asked in his cross-examination as to how the ledger seized on 24-6-2001 bore an entry of 26-6-2001; that he had admitted that the entry dated 26-6-2001 was in his own hand writing; that the finding of the adjudicating authority that the 26-6-2001 was a slip of pen is misplaced because if it is a slip of pen, then the original entry generated in the cash book must be available. He also mentioned that both S/Shri Kamlesh Singh and Anurag Sharma, Inspectors, stated in their cross-examination that no enquiry was made from Chitra Traders as to whom goods were sold or disposed by them; that Anurag Sharma also mentioned that he did not verify how seven GRs not relating to Chitra Traders were resumed from their business premises; that his cross-examination also reflects the manipulation of accounts inasmuch as the adjudicating authority, in the impugned orders, mentions that R.K. Mittal never acted as commission agent, Anurag Sharma has mentioned that Chitra Traders is a commission agent; that the duplicate order book resumed by the Department is not the actual duplicate order book because if it was a genuine duplicate order book, the Consignees mentioned in the GRs resumed from Chitra Traders, would tally with the transactions mentioned in the duplicate cash book and ledger maintained by Chitra Traders; that the net result is that out of allegation of clandestine removal of 149 GRs, out of sample 8 GRs, consignees in seven GRs do not match with the order book resumed from Chitra Traders; that, therefore, on the basis of one isolated transaction, the duty cannot be confirmed in respect of remaining 148 transactions. He also pointed out that there is no entry of commission charges realised by Chitra Traders from the Appellant No. l or any other firm; no sales tax return has been filed by Chitra Traders regarding any purchase or sales mentioned in their cash book or ledger.

3.2 He further mentioned that R.K. Mittal has retracted his statement dated 24-6-2001 by his letter dated 17-7-2001 wherein he had stated that his statement was recorded under coercion; that in his statement dated 26-9-2001, he again diverted from his retraction by stating that his earlier statement dated 24-6-2001 was also given voluntarily; that statement of such a person cannot be relied upon; that moreover he has not been made a party to show cause notice though he was allegedly dealing in contraband goods; that in his cross-examination Mittal categorically mentioned that he did not remember any specific name of any person or employee of M/s. Rama Shyama Paper Mills whom cash was given by him to on different dates; that there is no substance in the finding in the impugned order that due to time lag between the search and cross-examination he was unable to remember the name of recipient of cash. The learned Advocate emphasised that duty cannot be demanded on the basis of account books of a third party; that no proof has been brought on record by the Revenue to show that they had cleared the goods to Chitra Traders without payment of duty. He relied upon the decision in the case of Lalit Kumar v. Asstt. Collector of Central Excise [ (All.)] wherein it has been held by the Allahabad High Court that conviction is not sustainable if the entries in Bahikhatas are not proved to show that so much of gold or cash was taken and converted into ornaments. He emphasised that out of 149 transactions, there is no direct documentary evidence of GRs/transporter/destination/invoice to the final consumer; that even eight GRs relates to seven parties other than Chitra Traders; that the statements of driver, cleaner of vehicle No. HR 29 D - 1541 and 6 contractual labourers cannot be relied upon since the driver and six labourers did not turn up for cross-examination; that if witnesses do not appear for cross-examination, their statements cannot be used in proceedings against the assessee. He relied upon the decision in Arsh Castings Pvt. Ltd. v. CCE [], Balbir Steel Pvt. Ltd. v. CCE [] and Emmtex Synthetics Ltd. v. CCE, New Delhi [ (T)] wherein it has been held that no presumption on the basis of uncorroborated, uncross-examined evidence and the alleged entries made by the Vice President in his private diary could be drawn about the receipt of yarn in a clandestine manner. The learned Advocate also contended that the Revenue had not been able to establish its case vis-a-vis disproportionate consumption of raw material, power consumption, capacity utilisation, labour employed or the actual customer.

4. In respect of 17 consignments alleged to have been cleared by the appellant-company to other customers, the learned Advocate submitted that out of 50 odd transporters alleged to have been involved in clandestine removals, Department short listed eight for investigation and could only detect an alleged evasion in 17 cases; that only one transporter namely Sanjay Garg, Partner of Shri Balaji Transport Company, tendered himself for cross-examination; that even he responded evasively to the questions in cross-examination and thus does not assist the case of the Department; that BR Freight Brokers had questioned the authenticity of the GR in its statement (Sl. Nos. 1, 3, 5 and 8); that when the transporter himself is stating that the GRs do not pertain to him, putting the burden on the Appellants is not sustainable in law. He relied upon the decision in Quality Exports & Chemicals v. CEGAT [ (All.)] wherein it has been held by the Allahabad High Court that demand is not sustainable on the basis of seized GRs when no enquiries were made from consignors and consignees. Regarding excess stock of finished goods weighing 39.681 MT, the learned Counsel mentioned that 11.900 MT was the production of 21-6-2001 which was to be entered in the records; that remaining goods were non-marketable uncoated kraft paper. Finally, he submitted that if duty is held to be payable by them the price should be treated as cum-duty price from which statutory deductions should be allowed as held by the Supreme Court in the case of Maruti Udyog Ltd. v. CCE, [ (S.C.)]; that as there is no case of clandestine removal against them, no penalty is imposable on any of the Appellants; that no penalty is imposable under Rule 209A of the Central Excise Rules, 1944 as he has no where given any admission in his statement that he was aware of any clandestine removal, that R.K. Mittal has also not deposed in his cross-examination that reference to Dinesh as ‘recipient of cash’ means reference to Dinesh Goyal. Reliance has been placed on the decision in S.L. Kirloskar v. Union of India, [] and Standard Surfactants Ltd. v. CCE, []. Shri K.N. Sharma, learned Advocate appearing on behalf of Manoj Sharma, submitted that the finding that the handwriting of Manoj Sharma is recognizable in 8 GRs is baseless as no statement from him had been recorded nor the Department had sought any opinion of handwriting expert; that he had issued two accommodation invoices (No. 61 and 93) behind the back of the Company; that however, there was no Revenue leakage as there was no physical movement of goods. He finally mentioned that Manoj Sharma has already lost his job and this requires leniency because there is no pecuniary gain to him.

5. Countering the arguments, Shri D.R Chaudhary, learned Senior Departmental Representative, submitted that on search of the premises of M/s. Chitra Traders, a number of records including cash books, order books, invoice issued by M/s. Rama Shyama Papers Ltd. were recovered, the scrutiny of which revealed that Appellant No. 1 had cleared goods clandestinely to Chitra Traders during 11-6-2000 to 21-6-2001; that R.K. Mittal admitted in his statement that 149 consignments were cleared by the Appellant No. 1 to Chitra Traders or for their buyers; that from the statement of driver and cleaner of the truck and labourers, it was found that the Appellant No. 1 had indulged in clandestine removal of finished goods; that the allegation by them that the accounts resumed from Chitra Traders were manipulated is baseless as the search was conducted in a follow up action and in the presence of independent witnesses; that the recipient of cash from Chitra Traders on behalf of the Appellant No. 1 had been mentioned as Vikas, Vipin, Dinesh, Rajneesh, Pradeep; that Vipin has been confirmed to be an employee of the Appellant No. 1 and Dinesh is the first name of their Director, Dinesh Goyal; that further they have also admitted to the transactions under invoice Nos. 64, 66 and 93; that 7 GRs did not have the name of Chitra Traders as the goods were orders to be sent by Chitra Traders to the Party concerned from the factory of the Appellant No. 1; that parallel invoice No. 64 dated 18-6-2001 had been recovered from the premises of Chitra Traders which had not been disowned by the Appellant No. 1; that they have also not challenged the fact of their business association with Chitra Traders. The learned Senior Departmental Representative, further mentioned that the Commissioner has also examined the discrepancy in the names of the parties as per GRs, resumed from Chitra Traders and the names mentioned in Charts A and B, prepared by the Department on the basis of ledger, cash book, order book resumed from Chitra Traders; that the adjudicating authority has found that in respect of GRs No. 6624, there was no discrepancy as the date was 9-11-2000 and not 9-4-2000 as pointed out by the Appellant No. 1; in respect of GR No. 168, name is same in GR and Charts A and B; in respect of GRs 6669 and 1276, names remained to be mentioned in Charts A and B and in respect of GR 6696, the consignee was Chitra Traders who subsequently sold the goods to Goel Packers whose name was mentioned in Charts A and B; that regarding difference in names in remaining three GRs, the officers had explained the same in cross-examination. He emphasised that in business initially an order may have been placed for delivery to a particular firm but subsequent business compulsions may have resulted in the change in name and goods may have been sold to a different party. He also contended that as the panchnama has not been challenged, the fiction of records being manipulated by Chitra Traders stands demolished and the reliability of ledger, cash book and order book of Chitra Traders is not in doubt which proves beyond doubt that at least 149 consignments were clandestinely cleared by the Appellant No. l to Chitra Traders. He relied upon the decision in CCE, Madras v. Madras Chemical, [ (T)] wherein it has been held that hardly one comes across a witness whose evidence does not contain a grain of untruth or at any rate exaggeration, embroideries or embellishments and it is, therefore, the duty of the court to sift and scrutinize the evidence carefully. The learned Senior Departmental Representative, mentioned that the Tribunal in the said decision accedes to the submissions of the learned Senior Departmental Representative that the finding of the Collector (Appeals) under the impugned order that the Department should have identified the regular customers of the respondents and enquired them with reference to the receipt of consignments is not legally tenable.

6. Regarding 17 consignments found from the records of the transporters, the learned Senior Departmental Representative contended that the Appellant No. 1 had submitted a GR wise clarification, in a chart form (Page 95 of Appeal Book) the scrutiny of which reveals as under :

(i)          No explanation has been referred in respect of Serial No. 5;

(ii)         Regarding Serial Nos. 1 to 3, 10 to 17, the explanation offered is that as copy of GRs were not furnished, they were unable to clarify the same; that the Department had furnished to the Appellant daily inward register and cash book of the Transporter; that in respect of Serial Nos. 10 and 11, Shri Gulshan Kumar of B.R. Freight Brokers, had deposed in his statement that they had provided the vehicles whose number was mentioned in the GRs to Rama Shyama Paper Ltd; that thus there is no doubt that the Appellant No. 1 had removed the goods under the said GRs; that similarly Sanjay Garg of Balaji Transporter Co. in his statement had deposed about the fact that the vehicles at Sl. Nos. 12 and 3 had been actually provided to the Appellant No. l; that even in his cross-examination he had reiterated the fact; that in respect of Serial Nos. 14 to 17, Vinod Uppal, Proprietor did not deny, in his statement, the fact of providing the vehicles to Rama Shyama Papers Ltd. and despatch of their finished product.

(iii)       Regarding Serial Nos. 4, 8 and 9, the invoices mentioned by the Appellants are dated 31-5-2001, 28-1-2001 and 20-2-2001 respectively whereas the dates of Bills are 2-6-2001, 31-1-2001 and 22-2-2001 that is after two days which is not possible.

(iv)       Serial Nos. 6 and 7 may not pertain to the Appellant and there may be a bona fide mistake.

7. The learned Senior Departmental Representative contended that thus the duty has been correctly demanded from the Appellant No. 1 in respect of the goods clandestinely manufactured and cleared which is evident from excess stock found in their premises, issue of parallel invoices, records seized from Chitra Traders and the Transporters; that penalty is imposable on the Appellant No. 1 for effecting clandestine removal; that penalty is imposable on Dinesh Goyal, he being the whole time director and caretaker of all day to day affairs of the Company; that penalty is also imposable on Manoj Sharma as admittedly he was engaged in maintenance of records pertaining to Central Excise and parallel invoices had been issued by him.

8.1 In reply, Shri K.K. Anand, learned Advocate, mentioned that there was no excess of goods as the production of goods made on 21-6-2001 was to be recorded in the books of account and the remaining goods were not up to quality goods; that it is settled law that if the persons are not offered for cross-examination, their statements cannot be relied upon. He relied upon the following decisions :

(1)         M/s. Arsh Castings Pvt. Ltd. v. CCE, Chandigarh,

(2)         M/s. Balbir Steel (P) Ltd. v. CCE, Kanpur,

(3)         Takshila Spinners v. CCE, Chandigarh, (T) wherein it has been held that

“occular and uncorroborative statements of the witnesses recorded during investigation at the back of the Appellants; without allowing them to test the correctness of the same by cross-examining those witnesses, could not be made basis for holding that the allegations against them as set out in the show cause notice stood proved.”

8.2 The learned Advocate also emphasised that without corroboration, the allegation of clandestine removal cannot be sustained. Reliance has been placed on the decision in Haryana Petrochemicals Ltd. v. CCE, New Delhi, (T) wherein the allegation of clandestine manufacture and removal was held to be not proved as “no statement of any buyer had been recorded to prove the clandestine sale”; that in the said decision the Tribunal has stressed the need for corroboration of the documents allegedly maintained by a third party. He has relied upon the following decisions also -

(i)          Emmtex Synthetics Ltd. v. CCE, New Delhi - (T)

(ii)         M.M. Dyeing & Finishing v. CCE, Chandigarh - (T)

(iii)       Kothari Products Ltd. v. CCE, New Delhi - (T)

wherein the Appeal was allowed as the demand had been confirmed entirely on the basis of documents of the transporters without independent corroborative evidence and without questioning the alleged consignee of the goods.

8.3 The learned Senior Departmental Representative, on the other hand, relied upon the decision in the case of Magraj Patodia v. R.K. Birla, AIR 1971 Supreme Court 1295 wherein it has been held that “the fact that a document was procured by improper or even illegal means will not be a bar to its admissibility if it is relevant and its genuineness proved.” He contended that documents procured from third party are admissible as evidence.

9. We have considered the submissions of both the sides. The Revenue has charged the Appellants with clandestine manufacture and removal of paper mainly on the basis of documents seized from the premises of Chitra Traders and Transporters and the various statements recorded from the Proprietor of Chitra Traders, transporters and labourers working in the factory of the Appellants and also the driver or cleaner of the Truck which was in the process of loading on 22-6-2001 when the Central Excise Officers visited their factory premises. The Appellants, on the other hand, have contended that most of the persons whose statements have been relied upon have not been produced for cross-examination and the documents seized from third parties’ premises have not been corroborated by adducing evidence of any of the customers though the enquiries were conducted at different places as deposed by Shri Anurag Sharma, Inspector, in his cross-examination on 4-3-2002. Out of 19 consignments said to have been cleared by the Appellant No. 1 without payment of duty on the basis of five transporter, we observe that in respect of two consignments, it has been mentioned by the Revenue that the same may not pertain to the Appellants. Further, only one transporter Shri Sanjay Garg of M/s. Balaji Transporter Co. was produced for cross-examination which accounts for only two consignments out of 19 consignments in question. Shri Garg, it is observed from the record of cross-examination, has deposed that they generally work as commission agent and provide transport to Appellant No. 1; the payment is used to be received directly by the drivers after delivery of the goods at the consignee’s end and in case the driver did not report back for the next 3-4 days, it was presumed that the goods had reached the consignees end. Further, the name of the Applicant No. 1 on one GR No. 34 had been written not by Shri Sanjay Garg, but by his brother, whose statement has not been recorded and on GR 187, there is no mention of the name of the Appellant No. 1 at all. No statement of the drivers concerned has been recorded by the Revenue to establish that the finished goods manufactured by the Appellants were removed without payment of duty. The other transporters have not been produced for the purpose of cross-examination nor the statements of drivers who might have actually carried the goods, had been recorded. Moreover no statement of any of the recipients of the goods had been brought on record. Thus the statements of the transporters have remained uncorroborated and also suffers from the short coming of being not being cross-examined by the Appellants. It has been the settled law that the liability cannot be fastened on an assessee on the strength of documents seized from the possession of third party. There should be some corroborative evidence/material. The Tribunal has in the case of Emmtex Synthetics Ltd., supra, when the charge of clandestine removal was made against the Appellants therein out of yarn received from a third party based on the diary, loose documents and packing slips allegedly recovered from Shri B.M. Gupta, Vice President of the Supplier Company, held that “no presumption on the basis of uncorroborated, uncross-examined evidence of B.M. Gupta and the alleged entries made by him in the private diary, loose sheets, charts, packing slips could be drawn about the receipt of polyester yarn by the Appellants from the company, M/s. HPL, in a clandestine manner during the period in question. Similarly, no inference could be legally drawn against the Appellants of having manufactured texturised yarn out of the said polyester yarn and the clearance thereof, in a clandestine manner without the payment of duty.” The Tribunal had also referred to the decision in Oudh Sugar Mills Ltd. v. Union of India, 1978 (2) E.L.T. (J172) wherein “the Apex Court has observed that no show cause notice or an order can be based on assumptions and presumptions. The findings based on such assumptions and presumptions without any tangible evidence will be vitiated by an error of law”. The Tribunal also took note of the decision in Kamal Biri Factory and Shri Khushnuden Rehman Khan v. CCE, Meerut - (T) = 1997 (23) RLT 609 (CEGAT) wherein view has been taken that the allegations of clandestine removal of the goods will not stand established when based on the entries made by the assessee’s employee in a diary or on the basis of third party’s record in the absence of any corroborative evidence. It has also been the consistent view of the Tribunal that the statements of the witnesses, without allowing the assessee to test the correctness of the same by cross-examining those witnesses; cannot be made the basis for holding the allegation against the assessee. (Takshila Spinners v. CCE, supra). Similar views have been expressed by the Tribunal in the case of Haryana Petrochemicals Ltd., supra wherein the Tribunal has held that reliance cannot be placed on the documents maintained by a third party “who did not have the courage to come forward for cross-examination in order to test the veracity and correctness of the private record maintained by him.” It has also been held by the Tribunal in the case of Kothari Synthetics Industries v. CCE, Jaipur, (T) that entries made in the transport Register of the transport company could not be accepted as a conclusive proof of clandestine receipt of goods from that transport company for want of corroboration from any tangible evidence. Following the ratio of these decision, the duty demand cannot be upheld solely on the basis of uncorroborated statements and records of transporter. The statements tendered by the labourers can also not be relied upon by the Revenue as these persons were not produced for being cross-examined. Moreover, there is no corroboration of their statements with regard to the Trucks by which the goods were allegedly removed or the persons who received the goods. The Truck driver Shri Shiv Bahadur Yadav has also not been cross-examined and cleaner Shri Rakesh Kumar had deposed that the Bills/Invoices are supposed to be with the Driver and he being cleaner had no knowledge.

10. The confirmation of duty in respect of 149 consignments is also based on the records seized from the premises of M/s. Chitra Traders and not on the basis of any record seized from the premises of the Appellant-company. The Revenue has not been able to adduce any corroborative evidence to show the movement of goods from the premises of the Appellant-company to the premises of M/s. Chitra Traders or the Customers whom the goods were sent directly to as per the direction of Chitra Traders. No inquiry has also been made into these Customers who ultimately received the goods. There is no substance in the reasoning given by the Commissioner in the impugned order to the effect that “as the party did not challenge the fact of their business association with M/s. Chitra Traders, Delhi, the enquiry further down the line was not considered necessary.” The onus of proof that the goods were removed by the Appellants without payment of duty and without entering the same in their records is upon the Revenue which cannot be discharged merely on the strength of the entries made in the records of a third party without linking the removal of goods from the premises of the Appellant-company. The mere fact that the Appellant-company had business relation with Chitra Traders, does not mean that they will be liable to each and every entry made by Chitra Traders in their books of account. It is also noted that none of the transporters and none of the labourers whose statements have been relied upon by Revenue have mentioned that the goods in question were delivered to Chitra Traders from the premises of the Appellants. The material brought on record may at the most create a doubt only. But doubt cannot take the place of evidence. The Revenue has, thus, not proved its case against the Appellants in respect of 149 consignments. We, therefore, set aside the demand of duty and penalty imposed on Appellant-company and consequently the demand of interest.

11. As far as the excess stock found in the factory is concerned, the same is liable to confiscation as it was not entered in the books of account. No material has been produced by the Appellants in support of their contention that part of the goods were manufactured on the day of seizure and remaining goods were not of good quality. No such assertion about quantity was also made by Manoj Sharma in his statement dated 22-6-2001 when the goods were seized by the officers. We, however, reduce the redemption fine from Rs. One lakh to Rs. 50,000/- and penalty from Rs. 50,000/- to Rs. 15,000/- on this count. As penalty has been imposed on Appellant-company on account of excess goods found unaccounted, there is no need to impose separate penalty on Director and Authorised Signatory under Rule 209A of the Central Excise Rules, 1944. We, therefore, set aside the penalty imposed on Appellant Nos. 2 and 3.

12. All the appeals are disposed of in the above manner.