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IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : INDIAN PENAL CODE
Decided on: 11th July, 2011.
1. CRL. A. 929/2010
DINESH KUMAR @ DINU ..... Appellant
Through: Mr. Pradeep Kumar & Mr. Narinder Chaudhary,
Advocates
versus
STATE ..... Respondent
Through: Mr. Manoj Ohri, APP for the State.
AND
2. CRL. A. 1336/2010
RAJEEV KUMAR & ANR. ..... Appellants
Through: Mr. Pradeep Kumar & Mr. Narinder
Chaudhary, Advocates
versus
STATE ..... Respondent
Through: Mr. Manoj Ohri, APP for the State.
AND
3. CRL. A. 242/2011
SANDEEP ..... Appellant
Through: Mr. Ajay Verma, Advocate
versus
STATE ..... Respondent
Through: Mr. Manoj Ohri, APP for the State.
Coram:
HON'BLE MS. JUSTICE MUKTA GUPTA
MUKTA GUPTA, J.
1. These appeals impugn a common judgment dated 1st July, 2010 convicting
the Appellant Dinesh Kumar, in Criminal Appeal No. 929/2010, Sandeep in
Criminal Appeal No. 242/2011 and Rajeev Kumar and Praveen Kumar in Criminal
Appeal No. 1336/2010 for offences punishable under Sections 392/411 IPC,
besides convicting Appellant Praveen Kumar for offence punishable under Section
397 IPC and 25 Arms Act and the order on sentence dated 14th July, 2010 inter alia
directing Appellants Dinesh Kumar, Rajeev and Sandeep to undergo rigorous
imprisonment for a period of seven years for offence punishable under Section 392
IPC and three years for offence punishable under Section 411 IPC and Appellant
Praveen to Rigorous Imprisonment for 10 years for offence punishable under
Section 392/397 IPC and three years for offence under Section 411 IPC. The
Appellants Praveen, Rajeev and Sandeep have also been directed to undergo
sentence of imprisonment for a period of five years and a fine of Rs. 5,000/- under
Section 25 Arms Act.
2. The prosecution case in nutshell is that on 5th December, 2004 at about 3.30
P.M. the Appellants committed robbery of 23 mobile phones, several dummy
phones and about Rs. 80,000/- to Rs. 90,000/- at the shop No.23 ‘Mobile India’ at
NWA Club Road, Punjabi Bagh and also gold chain and purse belonging to
Sanjeev Kumar and Navneet Kaur. They also extended threats to Sanjeev Kumar
and his assistant Navneet Kaur with pistols and restrained them by pushing them
inside the cabin and tied them with rope to facilitate the commission of robbery
and thereafter escaped from the spot. On registration of the FIR, investigation was
carried out. On 18th December, 2004 Dinesh Kumar and Rajeev were arrested
from Madipur crossing and from them mobile phones and one country made pistol
of .12 bore was recovered from Appellant Rajeev. The Appellant Dinesh Kumar
was found in possession of one mobile phone make Nokia along with a charger,
booklet and cardboard box which had allegedly been robbed from the shop and it
was also disclosed that on 10th December, 2004 he had sold one mobile phone
model No. 6610 with IMEI No.315350404912887 belonging to one Gaurav
Kakkar PW4 stolen from the shop of the Sanjeev to PW5 Neeraj Sachdeva at his
shop in MCD Market, Karol Bagh. The Appellant Dinesh Kumar further got
recovered five mobile phones make Nokia from his house at Village Budhpur,
District Baghpat, U.P. Thereafter they led the police party to Karol Bagh at Shop
No. 140, MCD Market and identified Neeraj Sachdeva to be the person to whom
the mobile phone was sold by the accused. On 22nd December, 2004 the
Appellant Sandeep and Praveen were arrested from Gate of ISBT Kashmere Gate
and a country made pistol with one live cartridge was at the instance of Appellant
Sandeep. On the disclosure of co-accused Praveen country made pistol was
recovered from Shakarpur Railway Crossing near safeda tree by digging out the
earth. On 23rd December, 2006 Sandeep and Praveen led the policy party at
sugarcane field at Village Budhpur, District Baghpat, U.P. and got recovered a bag
containing 19 dummy phones, one booklet of Nokia 3105 along with other
documents. On 25th December, 2004 accused Dinesh Kumar made a
supplementary disclosure and at his instance, 5 mobile phones were recovered
from his house at Village Budhpur, District Baghpat. During the TIP the Appellant
and Sandeep was duly identified by Ms. Navneet Kaur PW3 whereas the other
Appellants refused to participate in the TIP. After the charge sheet, trial was
conducted and the Appellants were convicted and sentenced as above.
3. Learned counsel for the Appellant Dinesh Kumar contends that the role
assigned to the Appellant is that he was standing outside the shop providing safety
to other three accused for committing the offence. No person has witnessed the
presence of the Appellant. One mobile phone was allegedly recovered on the
search of the Appellant on 18th December, 2004. It is further alleged that he sold
one mobile phone in Gaffar market and PW5 Neeraj Sachdeva the shop keeper and
PW1 Pramod Kumar, his employee testified about his selling the said mobile
phone. However, PW4 Gaurav Kakker who had purchased this mobile phone and
had given it for repair at ‘Mobile India’ has not identified the phone and has only
handed over the cash memo Ex. PW4/A. PW3 Navneet Kaur failed to identify the
Appellant as an accused who was standing outside. The identification by PW10
Sanjeev Kumar, the owner of the shop is also an improvement as he has not stated
this fact in the Statement under Section 161 Cr.P.C. PW10 Sanjeev Kumar has
stated in his testimony that he saw three persons inside and one person outside. On
confrontation with his statement it was found that in the statement under Section
161 Cr.P.C. he had only stated about two persons. Thus, the presence of the
Appellant is not proved at the spot. Since this part of his statement is a material
improvement it has to be excluded from consideration. Besides this statement of
PW10 there is nothing to implicate the Appellant in the alleged offences.
Moreover, no public person was associated at the time of arrest nor when the
mobile phones were allegedly recovered. No public persons were even associated
at the time of recovery at Baghpat. The chance print though lifted do not resemble
with that of the Appellant. Besides PW3 Navneet Kaur there were two other
employees who were though cited but not examined as witnesses. Thus, the best
evidence was kept back by the State and the Appellant has been falsely implicated.
Though as per the Statement of PW3 Navneet Kaur it is alleged that the robbery
continued for two hours, however, no other person witnessed it. PW5 Neeraj
Sachdeva, the owner of the shop at Gaffar Market though very vigilant but did not
bother to take any document when the mobile phone was further sold by him. The
Appellant examined his father as DW1 who deposed that the Appellant was
arrested on 17th December, 2010 and not on 18th December, 2010 as claimed.
However, neither the contentions raised by the learned counsel for the Appellant
nor the defence of the Appellant has been considered in the impugned judgment.
Reliance is placed on Staila Sayyed vs. State, 2008 (4) JCC 2840 to contend that
the absence of chance print proves the innocence of the Appellant. Relying on
Jaivir Singh vs. State, 1996 JCC 166 it is contended that failure to join the public
witnesses is contrary to Section 100 Cr.P.C. Regarding omission and material
improvement in the testimony, reliance is placed on State vs. Rajendra Singh, 1998
SCC (Crl.) 1605. In view of the testimony of witnesses and material witness
having failed to identify the Appellant being present at the spot, the Appellant is
entitled to be acquitted of the charge under Section 392/411 IPC. The Appellant
Dinesh Kumar has already undergone imprisonment for a period of five years five
months. Thus in the alternative it is prayed that the Appellant be released on the
period already undergone.
4. Learned counsel for the Appellant Sandeep while reiterating the contention
raised by the learned Counsel for the Dinesh Kumar contends that the
identification of the Appellants and the other accused persons is not as per the
requirement of law. The recovery of the country made pistol from the Appellant
does not link him to the factum of offence of robbery as PW 10 failed to identify
the country made pistol recovered from the Appellant. The recovery of 19 dummy
mobile phones is improper. PW3 Navneet Kaur took part in the TIP however,
PW10 Sanjeev Kumar the owner of the shop did not take part in the TIP. Thus, an
adverse inference should be drawn against the prosecution. PW3 Navneet Kaur
has admitted that she identified two accused persons in the police station on 24th
December, 2004. PW3 Navneet Kaur has not identified the Appellant in the Court
and has assigned no role to the Appellant. PW10 Sanjeev Kumar has identified the
Appellant, in the Court but did not participate in the TIP. Thus the Appellant has
not been identified by the witnesses. Despite the fact that 12 chance prints were
lifted from the spot but no report of CFSL was filed and hence adverse inference
should be drawn against the prosecution. It is also stated that no TIP of the articles
was got conducted. Even the recovery of dummy mobiles phone was on the joint
disclosure of the Appellant Sandeep along with Praveen and is thus inadmissible.
Allegedly on the joint pointing out a black raxine bag has been recovered from
sugar cane field from under the foliage. It is improbable that the Appellant would
keep the dummy mobile phones. It is alleged that the bills and cheques were
recovered along with the dummy mobile phones which is also highly improbable.
Reliance is placed on State of Maharashtra vs. Sukhdeo Singh and others, 1992 (3)
SCC 700, Kanan v. State of Kerala, 1979 (3) SCC 319.
6. Learned counsel for the Appellants Rajeev and Praveen reiterate the
submissions made by the learned counsel for the Appellants Sandeep and Dinesh.
It is further contended that the Appellant Praveen cannot be convicted for the
offence punishable under Section 397 IPC. In the alternative, he further contends
that Appellants have been in custody for more than six years four months and thus
they be released on the period already undergone.
7. Learned APP for the State on the other hand contends that the refusal of the
TIP by the witness is incorrect. Appellants Dinesh and Rajeev were arrested on
18th December, 2004 and application for sending them to judicial custody was
moved immediately. They were sent to judicial custody and only on their refusal,
an application dated 24th December, 2004 was filed for their police custody
remand which was granted for two days. Both PW10 Sanjeev Kumar and PW3
Navneet Kaur had gone for TIP however, the Appellants Dinesh and Rajeev
refused to undergo TIP and hence adverse inference should be drawn against them.
As regards Sandeep and Praveen who were arrested on the 22nd December, 2004,
an application was filed on 23rd December, 2004 when they were sent to judicial
custody till 5th January, 2005. Only after the TIP of the Appellant Sandeep was
conducted and the Appellant Praveen refused the same, the application for police
custody remand was moved on 5th January, 2005. Thus there is no question of any
witness having seen the Appellants in police custody. PW3 Navneet Kaur in the
judicial TIP conducted correctly identified the Appellant Sandeep. Thus the stand
of the Appellants in the statements under Section 313 Cr.P.C. that Appellants
Dinesh and Rajeev were allegedly shown in the Police Station while in custody is
contrary to the record.
8. According to the learned APP, the Appellants Rajeev, Sandeep and Praveen
have been duly identified by PW10 Sanjeev Kumar and PW3 Navneet Kaur.
Further even if it is assumed that the identification of Dinesh in the testimony of
PW10 is an improvement, Dinesh has been identified as the person who sold the
mobile phone robbed from the complainant’s shop in Gaffar Market soon after the
incident. Since soon after the incident the Appellant Dinesh was in possession of
mobile phone a presumption under Section 106 of the Evidence Act arises which
he has to discharge. PW10 Sanjeev Kumar has clarified the role of the fourth
person, that is, Dinesh and thus reliance can be placed on his testimony. PW1
Parmod Kumar the employee at the shop in Gaffar market has not only identified
the Appellant Dinesh but also the mobile phone and the receipt. Similarly PW5
Neeraj Sachdeva the employer of PW1 Parmod Kumar also identified the
Appellant Dinesh, mobile phone and the receipt. On the disclosure of the
Appellants there were recoveries of mobile phones, receipt etc which were duly
identified. There is no dispute to the fact that the katta recovered was the one
which was used on the date of the incident. As regards the joint disclosure it is
contended that it is the duty of the Court to find out which accused made the first
disclosure and thus on that basis convict the accused. Reliance in this regard is
placed on State (Govt. of NCT of Delhi) Vs. Navjot Sandhu 2005 (XI) SCC 600.
The evidence of the police witness is reliable in unearthing the sequence of events.
It is contended that reliance on the decision of Pradeep Saini (supra) by the
learned counsel for the Appellant is misconceived.
9. I have heard learned counsel for the parties and perused the record. A
perusal of the evidence shows that though PW3 did not identify the Appellants in
the Court, however PW10 Sanjeev Kumar, owner of the mobile shop ‘Mobile
India’ identified them in the Court. As regards PW3 turning hostile is concerned,
the prosecution has proved the complaint in which it is recorded that the wife of
Appellant Dinesh Kumar @ Dinu threatened the witness PW3. In so far as the
Appellants Rajeev Kumar, Praveen Kumar and Sandeep are concerned, it is not a
case where PW10 had a fleeting glimpse of them. The Complainant was tied by
them and his shop was ransacked. All this happened in front of him and went on
for a considerable time. His hands were tied however his eyes were open thus he
witnessed each and every person and action. The reason for refusal of the T.I.P. by
Appellants Dinesh, Rajiv and Praveen is also not germane to the facts of the case.
Immediately on their arrest, the Appellants were sent to judicial custody wherein
their T.I.P. was got conducted and only on their refusal that the witnesses had
identified them in the police station. Further, Appellant Sandeep was duly
identified by PW2. Though, this is not a substantive piece of evidence, however
the substantive evidence is of PW10 identifying the accused in the witness box
cannot be ignored. The evidence of identification of the Appellants by PW 10 is
further strengthened by the other evidence of recovery of the mobile phones etc. at
their instance thus lending reliability to the testimony of PW10.
10. As regards the Appellant Dinesh, there is no doubt that the statement of
PW10 is a material improvement. He has not stated in his statement Ex.PW 10/A,
the rukka on the basis of which the FIR was registered, that there was a fourth
person who was standing outside and ensuring the safety of the three accused
inside. In his statement, he had mentioned only about three accused. Moreover
Dinesh has been identified by PW10 for the first time as he had refused the TIP.
PW10 did not get sufficient opportunity to see Dinesh as he was allegedly standing
outside the main gate, thus if at all PW10 can be said to have seen Appellant
Dinesh, it would have been a fleeting glimpse. However, the complicity of
Appellant Dinesh Kumar is proved from the recoveries pursuant to the disclosures
made by him. Pursuant to the disclosure of Appellant Dinesh Kumar, he took the
police to the shop at Gaffar Market where he sold the mobile phone. He was duly
identified by PW1 Pramod Kumar and PW5 Neeraj Sachdeva as the person who
had sold the mobile phone to them and at the time of selling, he had deposited
photocopy of his driving license which gives his name as Dinesh Kumar.
Moreover, the testimony of PW4 that a day prior to the incident, he had given this
mobile phone for repair at the shop of PW10 on 4th December, 2004 further
corroborates the testimony of PW10 Sanjeev Kumar, PW1 Pramod Kumar and
PW5 Neeraj Sachdeva. Thus the fact that Dinesh was involved in the offence of
robbery is proved by the fact that soon after the incident he was found in
possession of the robbed mobile phones. Reliance in this regard is placed on
Gulab Chand Vs. State of Madhya Pradesh AIR 1995 SC 1598. From the chain of
circumstances and in view of the presumption under Section 114(a) of the Indian
Evidence Act, no other inference can be arrived at except that Appellant Dinesh
was a part of the said robbery.
11. Great emphasis has been laid by the learned counsels for the Appellants on
non-joining of public witnesses. In this regard it would be apt to note that the
witnesses of recovery have been cross-examined at great length. Nothing has been
elicited in their cross-examination. Thus, mere non-joining of public witnesses
will not discredit the otherwise credible testimony of the Police witnesses.
12. Learned counsels for the Appellants have strenuously argued that the chance
prints were lifted from the spot, however the CFSL report in this regard has not
been filed, thus indicating that the Appellants are not involved in the offences
alleged. I find no merit in this contention. The robbery took place in a shop where
number of people come. The incident occurred around 5.30 PM. Thus, in such a
place finger prints of number of customers, employees would be available. Merely
because the CFSL report has not been filed for the reason that no report of the
finger prints tallying with that of the Appellants was received, does not lead to the
inference that the Appellants did not commit the offences alleged.
13. The recoveries from Appellant Dinesh are of mobile phones, i.e. one from
his possession, one having sold at the shop of PW5 Neeraj Sachdeva and five from
his house. The EMEI Nos. and the receipts of these phones had been handed over
by PW10, the complainant soon after the incident, much before the recoveries were
effected.
14. Before discussing the joint disclosures by Appellants Praveen and Sandeep
are concerned, it would be appropriate to reproduce the relevant part of the
decision rendered by Hon’ble Supreme Court in State (Govt. of NCT of
Delhi) (supra):-
“145. Before parting with the discussion on the subject of confessions under
Section 27, we may briefly refer to the legal position as regards joint disclosures.
This point assumes relevance in the context of such disclosures made by the first
two accused viz. Afzal and Shaukat. The admissibility of information said to have
been furnished by both of them leading to the discovery of the hideouts of the
deceased terrorists and the recovery of a laptop computer, a mobile phone and cash
of Rs 10 lakhs from the truck in which they were found at Srinagar is in issue.
Learned Senior Counsel Mr Shanti Bhushan and Mr Sushil Kumar appearing for
the accused contend, as was contended before the High Court, that the disclosure
and pointing out attributed to both cannot fall within the ken of Section 27,
whereas it is the contention of Mr Gopal Subramanium that there is no taboo
against the admission of such information as incriminating evidence against both
the accused informants. Some of the High Courts have taken the view that the
wording “a person” excludes the applicability of the section to more than one
person. But, that is too narrow a view to be taken. Joint disclosures, to be more
accurate, simultaneous disclosures, per se, are not inadmissible under Section 27.
“A person accused” need not necessarily be a single person, but it could be
plurality of the accused. It seems to us that the real reason for not acting upon the
joint disclosures by taking resort to Section 27 is the inherent difficulty in placing
reliance on such information supposed to have emerged from the mouths of two or
more accused at a time. In fact, joint or simultaneous disclosure is a myth, because
two or more accused persons would not have uttered informatory words in a
chorus. At best, one person would have made the statement orally and the other
person would have stated so substantially in similar terms a few seconds or
minutes later, or the second person would have given unequivocal nod to what has
been said by the first person. Or, two persons in custody may be interrogated
separately and simultaneously and both of them may furnish similar information
leading to the discovery of fact. Or, in rare cases, both the accused may reduce the
information into writing and hand over the written notes to the police officer at the
same time. We do not think that such disclosures by two or more persons in police
custody go out of the purview of Section 27 altogether. If information is given one
after the other without any break, almost simultaneously, and if such information is
followed up by pointing out the material thing by both of them, we find no good
reason to eschew such evidence from the regime of Section 27. However, there
may be practical difficulties in placing reliance on such evidence. It may be
difficult for the witness (generally the police officer), to depose which accused
spoke what words and in what sequence. In other words, the deposition in regard to
the information given by the two accused may be exposed to criticism from the
standpoint of credibility and its nexus with discovery. Admissibility and credibility
are two distinct aspects, as pointed out by Mr Gopal Subramanium. Whether and to
what extent such a simultaneous disclosure could be relied upon by the Court is
really a matter of evaluation of evidence. With these prefatory remarks, we have to
refer to two decisions of this Court which are relied upon by the learned defence
counsel.”
15. A perusal of the testimony of PW14 Inspector Ishwar Singh shows that
though it was stated that both of them disclosed, however reference was made to
the Appellant Sandeep first pointing out the place from where recovery is made.
Moreover, in the present case 19 dummy mobile phones in a rexine bag along with
papers were thrown. Thus, the possibility of the two Appellants throwing &
concealing the same together cannot be ruled out. Therefore on facts it cannot be
said that both the Appellants did not possess the knowledge of concealment of the
rexine bag.
16. Learned counsels have next contended that the recoveries from the
Appellants cannot be relied upon as no TIP of the properties allegedly recovered
was conducted. The recovered articles have been duly identified by PW10 the
complainant. Moreover, PW10 had furnished the receipts etc. of the mobile
phones which depicted their EMEI No. which were found on the mobile phones
recovered. Further, amongst the items recovered were cheque Ex.X21; settlement
slip printed by credit machine bearing the name of Mobile India dated 2nd
December, 2004 Ex.X22; slip issued by Bank of India reflecting the receipt of
amount of Rs. 66,000/- deposited by mobile India Ex.X23 etc. These items are
clearly identifiable and connect the Appellants to the offences charged beyond
reasonable doubt.
17. In view of the specific deposition of the PW10 that Appellant Praveen
pointed out pistol on him and PW3 that when Appellant Rajeev tied them
Appellant Sandeep kept the mobile phones in the bag, I find no ground to acquit
Praveen for offence under Section 397 IPC.
18. In view of the evidence of PW17 K.C. Varshney, Asstt. Director FSL that
Ex.F1 to Ex.F3 were in working condition and were firearms and cartridges A1 and
A2 ammunitions as defined in the Arms Act, and as the recoveries made at the
instance of the Appellants inspire confidence, the judgment impugned convicting
the Appellants Rajeev, Sandeep and Praveen for offence punishable under Section
25 Arms Act is well founded.
19. Thus, I find no infirmity in the impugned judgment convicting the
Appellants for offences punishable under Section 392/411 IPC and Appellant
Praveen Kumar for offence 397 as well. In view of the fact that the Appellants
committed robbery in a shop in daylight at gun point, I do not find any reason to
reduce the sentence of the Appellants.
20. The appeals are dismissed.
MUKTA GUPTA, J
JULY 11, 2011
vn
Crl. Appeal Nos. 1336, 929/2010 & 242/2011
Page 1 of 18
* THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 07.07.2011
+ CEAR No.4/2004
COMMISSIONER OF CENTRAL EXCISE ...... PETITIONER
Vs
PADMINI POLYMERS ..... RESPONDENT
Advocates who appeared in this case:
For the Petitioner : Mr. Satish Kumar
For the Respondent: Mr. Pradeep Jain
CORAM :-
HON’BLE MR JUSTICE SANJAY KISHAN KAUL
HON'BLE MR JUSTICE RAJIV SHAKDHER
1. Whether the Reporters of local papers may
be allowed to see the judgment ? Yes
2. To be referred to Reporters or not ? Yes
3. Whether the judgment should be reported Yes
in the Digest ?
RAJIV SHAKDHER, J (ORAL)
1. By an order dated 26.05.2004 in a reference application preferred by the
revenue, this court had directed the Central Excise Service Tax Appellate Tribunal
(hereinafter referred to as the ‘Tribunal’) to refer following question of law to this
court :-
“Whether CEGAT is correct in holding that exemption under Notification No.4/97-
CE dated 01.03.1997 was available to the manufacturer, when statutory provisions
contained in Rule 57CC (9) of the Central Excise Rules, 1944 were not followed
by the party”.
2. Before we proceed further, it would be useful to refer to facts necessary for
adjudication upon the question referred to us. These facts being as follows :-
2.1 The respondent/assessee at the relevant point in time was engaged in the
manufacture of articles of plastic falling under chapter sub-heading no.3923.90 of
the schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the
‘Tariff Act’). The respondent/assessee in respect of its raw materials being: plastic
granules (HDPE, LDPE, Chips); master batches, packing material, etc. used in
manufacture of its finished products, availed of Modvat Credit under Rule 57 A of
the Central Excise Rules, 1944 (hereinafter referred to as the ‘Rules’). Thus,
there was a batch of finished goods qua which the respondent/assessee paid duty
and sought adjustment of duty paid on inputs (i.e., raw material) by seeking
recourse to the Modvat route. There was another batch of finished goods in respect
of which the respondent/assessee availed of the benefit of exemption notification
no.41/97-CE dated 01.03.1997 (hereinafter referred to as the ‘exemption
notification’), which prescribed ‘nil’ rate of duty for the said finished goods.
2.2 The respondent/assessee was, at the relevant time, operating four
manufacturing units and was in possession of three godowns. Out of the four
manufacturing units, three (3) were located in Sahibabad in the State of U.P. and
the fourth (4th) was located in Patparganj in New Delhi. Similarly, out of the three
(3) godowns, two (2) were situate in Sahibabad in the state of U.P. which were
used for storing finished goods and the third (3rd) godown located in the Wazirpur
Industrial Area, Delhi was evidently used for trading plastic granules.
2.3 On, the Directorate of Anti Evasion (DGAE) receiving intelligence that the
respondent/assessee was clearing goods without payment of duty, a raid was
conducted on 07.10.1997 at the various manufacturing units, godowns and
registered offices of the respondent/assessee.
2.4 According to the revenue, the search carried out at the aforementioned
premises of the respondent/assessee and the analysis of the records showed several
discrepancies, which included excess stock over and above that which was
recorded in the stock registers as also presence of raw materials in respect of
which documents were not available. The finished goods and raw material found
in excess of the quantity shown in the stock registers were seized by the revenue.
The respondent/assessee as a matter of fact also paid the differential duty in respect
of excess stock found in unit nos.1 and 2. For the sake of brevity, we are not
detailing out herein the discrepancies as they have been set out in the show cause
notice issued by the revenue.
2.5 It may only be noted at this stage that the show cause notice dated
02.03.1998 was not filed by the revenue in the captioned appeal. A copy of the
same has, however, been handed over by the counsel for the revenue during the
course of the hearing.
2.6 In the interregnum, the revenue had recorded the statements of the officers of
the respondent/assessee under section 14 of the Central Excise Act, 1944
(hereinafter, referred to as ‘CE Act’). The statement recorded were those of one
Sh. R.K. Chawla, Dy. General Manager (Commercial); Sh. Vijay Gupta, Assistant
Manager (Excise); Sh. Vivek Nagpal, Chairman and Managing Director; Sh. Ashok
Arora, General Manager; Sh. Raghunath Sharma, Assistant Accounts Manager; Sh.
P.K. Jain, Chief Executive Officer, Sh. R.L. Gupta, Assistant Manager; Sh.
Rakeshwar Dayal, General Manager (Purchase) and Sh. Rajneesh Kalra, Assistant
Manager (Distribution).
2.7 Since it is necessary for the purpose of adjudication of the question involved,
we may briefly advert to the relevant parts of the statement made by each of the
officers as recorded in the SCN. It may be noted at this state that the counsel for
the respondent/assessee has neither disputed the veracity nor the manner in which
it has been paraphrased in the show cause notice. Therefore, for the sake of
convenience, the same are extracted hereinafter :-
R.K. Chawla, Dy. General Manager (Commercial)
“Sh. R.K. Chawla further stated that during the year April, 96 to March, 97,
they had consumed 6,73,390 kgs and 8,67,158/- kgs. Of raw materials from IV and
RG.23A Pt.I respectively for production of exempted goods valued at
Rs.8,36,30,488/- and dutiable goods valued at Rs.6,48,76,868/-. This had
happened because more quantity of raw materials were issued from RG.23A Pt.I,
for manufacture of exempted goods. He further stated that same Moulding
machines were used for the manufacture of both dutiable and exempted goods, and
the above ratio between raw material and finished goods issued from Form IV
register and RG-23A clearly shows that modvatable inputs were diverted for the
manufacture of exempted goods.”
Sh. Vijay Gupta, Assistant Manager (Excise)
“He further deposed that though they were accounting for raw materials in RG-
23A Pt.I and Form IV Registers for the dutiable and exempted category of goods
respectively and the raw materials used for manufacture were accordingly reflected
in such records but they were unable to maintain any distinction for identification
of these materials as these were not stored separately. As a matter of fact the entire
raw materials of particular variety/nature were stored at one place only. He further
admitted that they were using the same raw materials for the manufacture of the
goods which were being cleared on payment of Central Excise duty as well as
under exemption. Similarly, same finished goods which were classifiable under
the same tariff were cleared on payment of duty as well as under exemption. The
percentage of recovery of duty as well as under exemption. The percentage of
recovery of finished goods from the inputs was reported by him to be around 99%.
He clearly admitted that benefit of exemption under notification no.4/97 dated
01.03.97 was not applicable to them. He further deposed that on 07.10.97 there
was shortage of finished goods involving Central Excise duty of Rs.98,975/- which
they had voluntarily debited from the PLA.
He further deposed that both modvatable and non-modvatable raw material
were stored together and as such both category of goods, i.e., dutiable or exempted
goods could be manufactured from a particular lot of plastic granules and it also
happened in practice. He also stated, inter alia, that they had not entered the
receipt of master batches in the Form-IV Register and admitted the mistake.
On perusal of Form IV Register and Rg.23A Pt.I Register for the year 1996-
97 he admitted that even though excess quantity of duty paid inputs was issued, yet
far less quantity of finished goods, cleared on payment of duty were accounted for
in the RG-I Register. Failing to explain this discrepancy, he stated that since both
the modvatable and non-modvatable inputs were kept together, apparently excess
quantity of modvat inputs issued from RG-23A Pt.I were diverted for the
manufacture of exempted goods.”
Sh. Ashok Arora, General Manager
“He further stated that they had taken modvat credit on entire master batch and
PP bags etc. received in the factories and had entered the same in RG-23 Part I
registers although some of these inputs were also used in the manufacture of
exempted category of goods.”
Vivek Nagpal, Chairman and Managing Director
“He also confirmed that there was no segregation of raw materials in respect of
which they had availed modvat and those on which they had not availed modvat
because of practical difficulties. He also clarified that they maintained Form IV for
the raw materials for which no modvat had been availed whereas for modvatable
inputs they had maintained RG-23A Pt.I register; and that they had been storing
both dutiable and exempted variety of finished products together.
Raghunath Sharma, Assistant Accounts Manager
“He further deposed that there was no segregation of dutiable/non dutiable raw
materials as well as finished goods, though the records were maintained separately
for both modvatable and non-modvatable inputs and dutiable and exempted
category of finished goods.
P.K. Jain, Chief Executive Officer
“He further stated that there was no segregation of either dutiable or exempted
variety of raw materials and dutiable or exempted finished goods in as much as
both were kept together without any demarcation. He further deposed that master
batch and P.P. bags were not entered in Form-IV but both these items i.e., master
batch and polybags were used in the manufacture of both dutiable and exempted
goods.”
R.L. Gupta, Assistant Manager
“On 07.10.97, though HDPE granules of Reliance Industries were found in
stock, the supporting documents available with the factory were of M/s. IPCL for
which he had no satisfactory explanation. He further, agreed with the
discrepancies found during stock verification by the visiting DGAE officers and
stated that they may not have received exact quantity of raw materials as specified
on supporting invoices.”
Rakeshwar Dayal, General Manager (Purchase)
“Another statement of Shri Rakeshwar Dayal was recorded on 17.10.97,
wherein, he inter alia stated that there was no distinction between the modvatable
and non-modvatable raw materials at the time of its receipt in the factory. In other
words, all the raw materials were identical and there were no segregation of raw
materials for its utilization in the manufacture of dutiable or exempted category of
goods.”
Sh. Rajneesh Kalra, Assistant Manager (Distribution)
“He agreed with the discrepancies of physical stocks of finished goods.”
2.8 As indicted above, a show cause notice was issued . By virtue of the said
show cause notice, the respondent/assessee was called upon to respond as to why
Central Excise Duty amounting to Rs.7,69,90,751/- ought not to be imposed on
the alleged ground of diverting raw material / inputs on which modvat has been
availed for the purposes of manufacturing goods cleared at nil rate of duty under
the aforementioned exemption notification. In addition, the respondent/assessee
was also called upon to respond as to why the interest ought not to be levied at the
rate of 20% under the provisions of Section 11 AB of the CE Act, as also as regards
the proposal to levy penalty under the relevant rules. The respondent/assessee was
also put to notice with regards to confiscation of seized plastic containers valued at
Rs.68,98,764/- and plastic granules (raw materials) valued at Rs.1,27,400/-. The
show cause notice further proposed appropriation of Rs.50 Lakhs deposited by the
respondent/assessee on 22.10.1997 in the form of advance towards excise duty
demanded. Furthermore, the respondent/assessee was also directed to show cause
as to why land, building, plant, machinery, material conveyance and any other
thing used in the manufacture, production, storage, removal and disposal of the
goods in issue ought not to be confiscated under Rule 173 Q (2).
2.9 In so far as Sh. Vivek Nagpal, Chairman and Managing Director and Sh.
R.K. Chawla, Dy.GM were concerned, they had been directed to show cause as to
why penalty ought not to be imposed on them under Rule 209 A.
3. In response to the aforementioned show cause notice, replies were filed by
the noticees in question which included the respondent/assessee. After perusing
their reply and hearing their authorized representatives, the Commissioner passed
an order-in-original dated 19/21.07.2000. The Commissioner, by virtue of the said
order, sustained the submission of the respondent/assessee with regard to the fact
that there had been no diversion of raw material /inputs in respect of which modvat
credit had been availed of in manufacturing finished goods which were cleared by
taking recourse to the exemption notification. Thus, proceedings against the
respondent/assessee (noticee no.1) were dropped with a caveat that seized raw
material valued at Rs.1,27,400/- be confiscated. Option was, however, given to the
respondent/assessee to redeem the said goods on payment of Rs.30,000/- as fine in
lieu of confiscation. A penalty of Rs.50,000/- was also imposed. In addition, the
Commissioner observed that neither confiscation of plastic containers seized,
which were valued at Rs.68,98,764/- nor the appropriation of Rs.50 Lakhs
deposited on 20.10.1997 by the respondent/assessee was permissible. Proceedings
against Sh. Vivek Nagpal, noticee no.2 and Sh. R.K. Chawla, noticee no.3 were
also dropped.
3.1 The respondent/assessee as well as the revenue was aggrieved by the order-
in-original passed by the Commissioner. Consequently, two cross-appeals were
preferred being appeal nos.E/1981/01-NB and E/3202/00-NB by the revenue and
the respondent/assessee respectively, before the Tribunal. In so far as, the
respondent/assessee was concerned, it did not press its appeal before the Tribunal.
Accordingly, the respondent/assessee’s appeal was dismissed. The appeal of the
revenue suffered the same fate, however, after reasons had been supplied for
dismissal of the appeal.
3.2 The revenue being aggrieved, sought a reference to this court, as indicated
hereinabove.
4. Before us, submissions on behalf of the revenue were advanced by Mr.
Satish Kumar, Advocate while, on behalf of the respondent/assessee, arguments
were addressed by Mr. Pradeep Jain.
5. Mr. Kumar submitted that the Tribunal had erred in dismissing the appeal of
the revenue in as much as it came to the conclusion that the condition prescribed
in the exemption notification for keeping ‘separate inventory’ of finished goods
which were chargeable to duty and those which were exempted from imposition of
duty did not include separate storage. Mr. Kumar submitted that the provisions of
Rule 57 CC (9) obliged the respondent/assessee to store finished goods on which
modvat had been claimed separately from those which were cleared by taking
recourse to the exemption notification. It was submitted that this was also the
understanding of the respondent/assessee which is demonstrable from the fact that
during the search carried out at the respondent/assessee’s premises, the revenue
obtained copies of undertaking filed by the respondent/assessee alongwith
classification list and declarations, etc. whereby, it had been undertaken by the
respondent/assessee that not only will it keep separate records of inputs but would
also store those inputs separately, on which, it did not intend to claim modvat but
was desirous of clearing the finished goods manufactured with the aid of such
inputs by taking recourse to the exemption notification.
5.1 Mr. Kumar submitted that clearly this undertaking was breached; a fact
which is borne out from the statement of officers of the respondent/assessee
recorded by the revenue under section 14 of the CE Act. In this connection, Mr.
Kumar drew our attention to the statements of the concerned officers of the
respondent/assessee, the relevant portions of which have already been extracted by
us hereinabove.
5.2 Mr. Kumar laid emphasis on the statements to show that the inputs on which
modvat had been claimed, had been diverted for manufacturing finished goods
which were cleared under the exemption notification. Mr. Kumar contended that
even though in the orders of the authorities below, there is a reference to the
statements made by the officers, both the Commissioner and the Tribunal have
failed to take this crucial fact into account to determine as to whether condition
no.8 of the exemption notification had been breached or not. Mr. Kumar submitted
that the authorities below have failed to appreciate this pertinent aspect of the
matter and, as a matter of fact have not returned finding in that regard.
6. On the other hand, Mr. Jain took us through the contents of the notification
and the orders of the authorities below to emphasis that there was no requirement
in law to store separately, the inputs on which modvat had been claimed as against
those on which no modvat had been claimed but had been used to manufacture
goods which were cleared under the exemption notification. In this regard and
with a view to buttress his submission, Mr. Jain also relied upon the judgment of
the Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. Nagpur Vs.
Collector of Central Excise, Central Excise Collectorate, Nagpur (1996) 2 SCC
159.
6.1 Mr. Jain vehemently argued that the show cause notice called upon the
respondent/assessee to answer a charge as to whether the benefit of the exemption
notification ought to be denied to the respondent/assessee solely on the ground that
the respondent/assessee had failed to store separately, the inputs on which modvat
had been claimed, and those on which no modvat had been claimed but were used
to manufacture finished goods which were cleared under the exemption
notification. Mr. Jain, in these circumstances, relied upon the judgments of the
authorities below and pressed for the dismissal of the revenue’s reference.
7. We have heard the learned counsels for both the revenue and the respondent/
assessee. In order to understand the contours of the controversy in issue, one
would first have to examine in the first instance the relevant terms of the
exemption notification. These being as follows :-
“In exercise of the powers conferred by sub-section (1) of section 5A of the Central
Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is
necessary in the public interest so to do, hereby exempts excisable goods of
description specified in Column (3) of the Table below or column (3) of the said
table read with the relevant list appended hereto, as the case maybe, and falling
within the chapter, heading no. or sub-heading no. of the Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986), (hereinafter referred to as the said Schedule),
specified in the corresponding entry in column (2) of the said table, from so much
of the duty of excise leviable thereon which is specified in the said Schedule, as is
in excess of the amount calculated at the rate specified in the corresponding entry
in column (4) of the said table, subject to any of the conditions specified in the
Annexure to this notification, the condition No. of which is mentioned in the
corresponding entry in column (5) of the said table.
S.No.
Chapter or heading No. or sub-heading No.
Description of goods
Rate
Conditions
(1).
39.23, 39.24 or 39.26
All goods other than –
(i). goods of polyurethances;
(ii). Insulated ware; and bags or sacks made out of fabrics (whether or not coated,
covered or laminated with any other material) woven from strips or tapes of
plastics; and fabrics for making such bags or sacks.
Nil
8
Condition No. Condition
8. If no credit of the duty paid on the inputs used in the manufacture of such
goods has been availed of by the manufacturer under Rule 57A of the Central
Excise Rules, 1944.” (emphasis is ours)
8. In addition to the above, regard would also be required to be had of the
provisions of Rule 57 CC (9). The said Rule reads as follows :-
“In respect of inputs (other than inputs used as fuel) which are used in or in
relation to the manufacture of any goods, which are exempt from the whole of the
duty of excise leviable thereon or chargeable to nil rate of duty, the manufacturer
shall maintain separate inventory and accounts of the receipt and use of inputs for
the aforesaid purpose and shall not take credit of the specified duty paid on such
inputs.” (emphasis is ours)
9. A perusal of the notification would indicate that condition no.8 clearly
stipulates that the benefit of the notification would be available only if in the
manufacture of the finished goods, which are cleared under the said notification,
those inputs are used on which modvat credit is not claimed under Rule 57A. The
obligation to provide separate inventory and accounts of the receipt and use of
inputs utilized in the manufacture of exempted finished goods, is contained in the
Rules, in particular, Rule 57 CC (9). The question which arises is whether the
expression ‘separate inventory’ used in Rule 57 CC (9) requires physical
segregation of inputs on which modvat is claimed and those on which no modvat is
claimed and are used in manufacturing finished goods cleared under the exemption
notification. The result would turn perhaps on the meaning of the word
‘inventory’. The word ‘inventory’ by itself when compendiously used could refer
to not only the raw materials, supplies, finished goods and work-in-progress and
merchandise in hand, or in transit and owned, but could also include the aggregate
value of such material; the process of counting, listing, pricing and itemizing such
material and physical inventory as well (see Dictionary for Accountants ERIC L.
KOHLER 5th Edition Page 271). Therefore, the argument made on behalf of the
respondent/assessee that separate inventory could never include separate storage is
not an argument which would find favour with us. We are in fact supported by the
observations made by the Supreme Court in this regard in the case of Chandrapur
Magnet Wires (P) Ltd. wherein, the Supreme Court while observing that the
assessee ought to have maintained not only ‘separate accounts’ but also ‘segregated
inputs utilized for manufacture of dutiable goods and duty free goods, allowed the
assessee’s appeal on the ground that the assessee had reversed the credit of duty
paid on the inputs used in the manufacture of exempted goods by debiting the
credit account before removal of such exempted final products. (see observations
made in paragraph 7 at page 161). The purpose of the Rule 57CC (9) is thus, in
our view, to facilitate those assessees in claiming benefit of exemption notification
who do not wish to claim modvat credit.
10. Therefore, in our opinion, the authorities below ought to have understood
the purport, scope and effect of condition no.8 contained in the exemption
notification in the background of the provisions of Rule 57CC (9). The entire
purpose of incorporating condition no.8 is that an assessee cannot be allowed to
seek benefit twice over. In other words, the assessee cannot seek modvat credit on
inputs and have that credit adjusted against duty payable against finished goods
and, at the same time, utilize those very inputs, on which modvat credit had been
claimed for manufacture of finished goods by having them cleared under an
exemption notification providing for a nil rate of duty. Therefore, while the Rules
provide for maintenance of separate inventory and accounts of receipt and use of
inputs which are used in the manufacture of finished goods cleared under the
exemption notification as against those on which modvat credit is claimed; the said
Rule is not incorporated in the exemption notification. No doubt, for the sake of
practicality, convenience and adherence to the Rules, separate storage of inputs
used in duty paid finished goods as against exempted finished goods would have
gone a long way in avoiding the entanglement, which has arisen in the instant case;
the notification by itself did not provide for such physical segregation. The
question, however, arises can Rule 57 CC (9) be given a complete go by. In our
view, if the Rule had been adhered to, then if a charge of evasion of excise duty
had been raised on the same set of facts, the onus would have been on the revenue.
Therefore, where the situation is converse, that is, where the respondent/assessee
fails to physically segregate inputs on which modvat had been claimed and those
on which no modvat had been claimed and these inputs were purportedly used for
manufacture of finished goods cleared under the exemption notification, the onus
would lie entirely on the respondent/assessee in order to avail of the benefit of the
exemption notification. The authorities below have merely examined the issue
from the point of view of the interpretation which according to them, had to be laid
on Rule 57 CC (9). We are unable to persuade ourselves that this is the correct
approach to be adopted in the matter. Notwithstanding the fact that no physical
segregation of inputs was carried out by the respondent/assessee, it was still open
to the respondent/assessee based on the records and evidence available in that
regard, that it had not used inputs (raw material) for manufacture of finished goods
(which were cleared by taking recourse to the exemption notification) on which
modvat credit had been claimed. What surprises us is that even though both in the
show cause notice as well as in the order of the Commissioner, there is extensive
reference to the statements of the officials and the records, which show prima facie
diversion of modvatable inputs for manufacture of goods cleared under the
exemption notification, no effort whatsoever has been made to determine as to
what is the exact extent of the diversion. The extent of the diversion would have
determined the finished goods in respect of which the benefit of the exemption
notification had to be denied. In this connection, the argument of Mr. Jain that all
the authorities below were required to determine as to whether Rule 57 CC(9)
required the respondent/assessee to physically segregate the modvatable inputs
from those on which no modvat had been claimed and had been used in clearing
finished goods under the exemption notification, is in our view misconceived. A
bare perusal of the show cause notice would show that it is replete with allegations
that respondent/assessee diverted modvatable inputs in manufacture of exempted
finished goods. There is not even a finding that such an exercise was attempted
and the respondent/assessee failed to provide the relevant evidence and material in
that regard to determine the extent of diversion and hence, in the final analysis
failed to discharge its onus in that regard. In these circumstances, the impugned
judgment of the Tribunal dated 12.09.2002 is set aside and the matter is remanded
to the Commissioner to determine the exact extent of diversion of modvatable
inputs by the respondent/assessee in the manufacture of goods cleared during the
relevant period by seeking recourse to the exemption notification.