2006 (7) TMI 419 - AT - Central Excise

Issues Involved:
1. Alleged clandestine removal of processed fabrics without payment of duty.
2. Tampering of entries in statutory lot registers.
3. Validity of forensic evidence and merchant statements.
4. Adherence to principles of natural justice.
5. Sufficiency of corroborative evidence to support the department's allegations.

Detailed Analysis:

1. Alleged Clandestine Removal of Processed Fabrics Without Payment of Duty:
The department claimed that the appellants cleared 18,09,817.50 L. Mtrs of processed fabrics valued at Rs. 3,60,51,227.55 without paying duty between 1-1-1989 and 15-9-1989. The appellants were accused of altering 305 entries in the lot register and erasing the last digit of figures in columns 9, 10, 12, and 13, leading to the duty demand by adding 'zero' in these figures.

2. Tampering of Entries in Statutory Lot Registers:
The Senior Scientific Assistant Chemical Examiner confirmed that the appellants tampered with 305 lot entries in the statutory lot registers by erasing unit figures to reduce the quantity of fabrics. Fake challans were prepared to match these alterations. The forensic report and the comparison of original and duplicate grey challans supported these findings.

3. Validity of Forensic Evidence and Merchant Statements:
The forensic report established the tampering of entries, but the department failed to gather concrete evidence of clandestine removal. The merchants' statements did not provide clear evidence of sending or receiving more fabrics than recorded. The appellants explained that sometimes a single duty-paying document covered goods from several merchants, which the department tacitly accepted by not demanding duty for these quantities.

4. Adherence to Principles of Natural Justice:
The appellants argued that the entire proceedings violated natural justice principles. They highlighted the destruction of records during communal riots in 1992 and their repeated but unsuccessful requests for copies of documents from the department. The department's refusal to provide these documents hindered the appellants' ability to defend themselves effectively.

5. Sufficiency of Corroborative Evidence to Support the Department's Allegations:
The alterations in the lot registers alone did not prove clandestine removal without corroborative evidence. The department lacked evidence of dispatch, transport, receipt, higher processing charges, or onward sale of the alleged higher quantity. The appellants' premises were visited multiple times by excise officials during the disputed period, but no irregularities were found. The department's inability to trace substantial quantities of processed fabrics or show higher consumption of electricity and raw materials further weakened their case.

Conclusion:
The tribunal found that while the altered entries raised suspicion, they did not justify the demand of duty and penal action without corroborative evidence. The benefit of doubt was given to the appellants due to the absence of proper investigation and concrete evidence. The impugned order, including the duty demand, penalty imposition, and confiscation of land, building, and plant, was set aside. The appeals were allowed.

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