2006 (12) TMI 423 - AT - Central Excise

Summary

Issues:
Demand of duty and penalty based on statements recorded from various individuals, retraction of statements by the Managing Director, reliability of statements, lack of seizure of goods, application of case law regarding retraction of statements, requirement of pre-deposit.

Analysis:

1. Demand of Duty and Penalty Based on Statements:
The lower authorities demanded duty and imposed a penalty on the appellants for the clandestine removal of cotton yarn during a specific period. The demand was primarily based on statements, including confessional statements from the Managing Director and statements from buyers/brokers. The appellants argued that the statements were retracted through notarized affidavits sent to the departmental authorities, claiming that the demand based on these statements should not be sustained.

2. Reliability of Statements and Lack of Seizure of Goods:
Upon examination, it was noted that there was no seizure of goods from buyers or brokers, and no discrepancies were found in the stock of goods at the appellants' factory compared to the records. The demand of duty was solely based on statements of buyers/brokers, raising doubts about their reliability. The circumstances surrounding the recording of these statements, including language barriers, led to suspicions regarding their accuracy.

3. Retraction of Managing Director's Statements and Application of Case Law:
The confessional statements made by the Managing Director were crucial in the case. Although the Managing Director claimed to have retracted these statements by sending notarized affidavits, the specific dates of receipt of these affidavits were not provided. The tribunal emphasized the importance of establishing the dates of receipt to apply the case law effectively. Without clear evidence of the retraction being received, the tribunal could not conclusively determine that the confessional statements were duly retracted.

4. Requirement of Pre-Deposit:
In light of the circumstances and the lack of definitive proof of retraction, the tribunal directed the appellants to make a pre-deposit of a reasonable amount of duty. The appellants were instructed to pre-deposit a specified sum and report compliance within a given timeframe. Compliance with this pre-deposit requirement would result in a waiver of further pre-deposit and a stay of recovery concerning the remaining duty and penalty amounts.

In conclusion, the judgment focused on the reliability of statements, the retraction of confessional statements, and the necessity of establishing clear evidence regarding the retraction process. The tribunal's decision to require a pre-deposit was based on the lack of conclusive proof of retraction, highlighting the importance of providing specific dates to support such claims in legal proceedings.