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.

11. This exercise shall be completed by the Commissioner within the period of

three months from today after giving the opportunity both to the

respondent/assessee as well as the revenue.

The reference is answered accordingly.

Sd/-

RAJIV SHAKDHER, J

Sd/-

SANJAY KISHAN KAUL,J