TAX CASES No.11 OF 2001 --- Against the order dated 21.12.2000 passed by the Member (Judicial) of Custom, Excise & Gold (Control) Appellate Tribunal, Eastern Bench Calcutta in Appeal No.E-71 of 2000. COMMISSIONER OF CENTRAL EXCISE--------- (Appellant) Versus M/S BRIMS PRODUCTS-------------- (Respondents) For the applicant : Mr. Rakesh Kumar Singh, SCCG Mr. Chakradhari Sharan Singh For the respondent : Mr. Radha Raman with Mr. Akhilesh Kumar P R E S E N T THE HON'BLE MR. JUSTICE CHANDRAMAULI KUMAR PRASAD THE HON'BLE DR. JUSTICE RAVI RANJAN --- Prasad & Ranjan,JJ. M/s Brims Products, Patna, respondent herein, was engaged in manufacture of product, namely, Pan Masala. Central Excise officers, while visited the factory of the respondent and after having made various checks and verifications, found 4 bags containing 120 kgs. Of final product not entered in the register maintained by the respondent. Thus, the same were seized under the provisions of Central Excise Act, 1944, hereinafter referred to as the „Act‟. On finding some loose papers in the dustbin with endorsement regarding certain 2 transactions, investigation was carried out by the authorities at the transporters end, which according to the Revenue, revealed that the respondent had received some consignments of betel- nut, which were not entered in the stock account. On the basis of aforesaid investigation, respondent was issued show cause notice alleging clandestine manufacture and the removal of 1618 kgs. of Pan Masala and as also proposed for confirmation of duty demand with respect to the confiscation of 4 bags containing 120 kgs. of final product which were not entered into the statutory records and also for imposition of penalty. The adjucating authority while examining the matter and also the investigation made at transporters end, gave clean chit to the assessee with regard to two consignments out of four. After recording the finding that few torn slips found in the dustbin of the factory have no much significance in the light of incomplete investigation by the department and further that the investigation does not reveal actual purchase by the buyers of the Pan Masala. However, with 3 regard to remaining two consignments, the opinion of the Central Revenue was that the assessee indeed had received those consignments of betel nut which is the main raw material for manufacture of Pan Masala. Thus, the authorities came to the conclusion that since one of the main raw materials, namely, Pan Masala, had been received by the respondent, it could be well presumed that the respondent had manufactured Pan Masala out of the above consignments which were subsequently, clandestinely removed and sold without payment of duty. As a result, the respondent was saddled with excise duty as well as penalty. Respondent preferred appeal. However, the order of adjudicating authority was confirmed by the appellate authority also. The respondent further preferred appeal before the Custom, Excise and Gold (Control) Appellate Tribunal, Eastern Bench, Calcutta, which was allowed holding that the charge of clandestine manufacture and surreptitious removal was required to be proved beyond doubt by the Revenue, which they have failed to do. The Tribunal also held that the 4 evidence collected during the course of investigation, merely creates doubt in favour of the department. However, the same cannot take place of legal evidence. Being aggrieved by the aforesaid order of the Tribunal, the Commissioner of Central Excise has filed this reference under Section 35-H-(I) of the Act for direction to the Tribunal to refer this Court the questions of law, which emerged out of the appellate order. By order dated 30.7.2003, this Court directed the Custom Excise and Gold (Control) Appellate Tribunal to draw statement of the case and refer following questions of law for determination to this Court: “(1) Whether, on there being a definite and concurrent finding of fact of receipt of the major ingredient (raw material) for the manufacture of excisable goods in the factory, whose shortage was neither explained by the manufacturer, nor entered in the accounts as required under the Central Excise Rules, can the only conclusion that can be drawn is the use of such ingredients (raw material) in the clandestine manufacture and removal of excisable goods without payment of excise duty? 5 (2) Whether the principle of preponderance of probabilities applies to establish clandestine removal of manufactured goods or the doctrine of “proof beyond all reasonable doubt”, in adjudication proceedings under the Central Excise Act, 1944 being quasi-judicial proceeding? (3) Whether in the absence of any explanation by the manufacturer regarding non-accountal and shortage of major raw material received in the factory, can an adverse inference be drawn against the notice and in favour of clandestine removal of manufactured goods for the purpose of assessment of duty of excise and imposition of penalty?” Mr. Rakesh Kumar Singh, learned Standing Counsel for Central Government, submits that the evidence collected during the course of investigation at the transporters end confirmed receiving of consignment of large quantity of betel nut by the respondent which were not entered into the stock register. According to him, the aforesaid evidence definitely weighed in favour of the department‟s stand that consignments of betel nut as aforesaid, must have been consumed for clandestine production and subsequent removal of final product without entering into the statutory books for the purpose of evading duty. He contends that the records of different transporters clearly 6 indicate that the consignments of betel nut were destined to reach the respondent. Thus, according to him, it could be safely presumed that those consignments of betel nut were used for production of Pan Masala and clandestine removal of the finished product. Despite appearance by filing Vakalatnama, nobody has appeared on behalf of the respondent at the time of hearing. Facts emanating from the records, disclose that the Central Excise authority itself has held with regard to two consignments out of four, that the investigation is incomplete and has been carried out only at the transporters end, thus, does not reveal actual purchase by the buyers. The authorities with regard to the aforesaid two consignments have also extended benefit of doubt to the respondent. We are of the opinion that there could not have any reason for arriving at different conclusion with regard to the remaining two consignments. In our opinion, since the charge was for clandestine manufacture and surreptitious removal 7 of finished final product, the same is required to be proved beyond doubt by the Revenue. One has to keep in mind that, though being the main ingredient, betel-nut is not the only raw material which is used in manufacture of Pan Masala. That apart, since the investigation has been carried only at the transporters end, no presumption could be drawn with regard to manufacture and removal of the final product. Presumptions and assumptions cannot take place of positive legal evidence, which are required for proving the charge. Even if, it is assumed that some raw materials were received at the factory of the respondent during the said period, the same cannot become conclusive proof of production and clandestine sale to different parties. Due to lack of positive evidence, benefit of doubt will always go in favour of the assessee. Accordingly, we answer the reference against the Revenue and in favour of the assessee and it is held that the receipt of one of the raw materials, does not conclusively prove clandestine manufacture and surreptitious removal of finished final product. Further, since the charge is regarding 8 clandestine manufacturer and removal of finished product for evading excise duty, the same cannot be held to be proved on the basis of principle of preponderance of probabilities and the Revenue has to prove the same beyond doubt. The reference is answered accordingly. As a result, this reference case is dismissed. However, there will be no order as to cost. (C.K.Prasad) (Dr.Ravi Ranjan) Patna High Court, Dated,15th Sept.2008. NAFR/ ahk