2002 (2) TMI 1333 - AT - Central Excise

Issues Involved:
1. Confirmation of duty and penalties on shortages found in the premises.
2. Non-maintenance of F-4 Registers.
3. Allegations of clandestine removal based on a seized notebook.
4. Examination of the scribe of the notebook.
5. Corroborative evidence for clandestine removal.
6. Purchase and accounting of raw materials.
7. Non-examination of workers and other corroborative witnesses.
8. Compliance with the Explosives Act and other regulatory requirements.

Issue-wise Detailed Analysis:

1. Confirmation of duty and penalties on shortages found in the premises:
The Commissioner reconfirmed the duty and penalties based on the shortages found during the inspection and the non-maintenance of F-4 Registers. The penalty on the partner of the firm was confirmed for not maintaining the registers and for the shortages.

2. Non-maintenance of F-4 Registers:
The Commissioner confirmed the penalties for the non-maintenance of F-4 Registers. The Tribunal had previously upheld this penalty, and the Commissioner reiterated the importance of maintaining these registers for proper accounting.

3. Allegations of clandestine removal based on a seized notebook:
The central issue was the clandestine removal of goods based on entries in a seized notebook. The Tribunal had remanded the matter for de novo consideration, emphasizing that mere seizure of a notebook without examining its scribe cannot confirm demands without corroborative evidence. The Commissioner, however, reconfirmed the demands, arguing that the Accountant who maintained the notebooks could not be contacted, and the retraction statement by Mr. Rajagopal was not convincing.

4. Examination of the scribe of the notebook:
The Tribunal highlighted that the non-examination of the scribe of the notebook was a significant lapse. The Accountant who maintained the notebook was present during the raid but was not examined, rendering the notebook inadmissible as evidence. The Tribunal stressed that it was the duty of the investigating officers to seek an explanation from the Accountant.

5. Corroborative evidence for clandestine removal:
The Tribunal noted that corroborative evidence was essential for confirming clandestine removal. The Commissioner admitted that investigations at the transporter's end and insurance companies did not produce evidence of clandestine removal. The Tribunal emphasized that the absence of such evidence weakened the department's case.

6. Purchase and accounting of raw materials:
The Tribunal observed that the Commissioner failed to prove the purchase of raw materials valued at over Rs. 1.09 crores. The appellants argued that inputs were regulated under the Explosives Act and purchased through governmental sources. The non-examination of these suppliers was deemed fatal to the case. The Tribunal concluded that the Revenue did not prove the purchase of raw materials for manufacturing the final product.

7. Non-examination of workers and other corroborative witnesses:
The Tribunal found that the non-examination of workers and other corroborative witnesses was a significant oversight. The Managing Partner had admitted shortages and the genuineness of the notebook, but no statements were recorded from laborers or transporters. The Tribunal stressed that each link in the production and removal process needed to be proved, which was not done.

8. Compliance with the Explosives Act and other regulatory requirements:
The Tribunal noted that the appellants were required to insure fireworks and obtain permissions from various authorities. The Commissioner did not adequately address how the appellants could manufacture and remove controlled explosive commodities without proper protection and insurance. The Tribunal found the Commissioner's findings based on presumptions and assumptions unacceptable.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals, concluding that the Revenue did not provide sufficient evidence of manufacture or removal without payment of duty. The seized notebook's entries were not proved, and the scribe was not examined, making the notebook inadmissible as evidence. The Tribunal applied the ratio of several judgments, emphasizing the need for corroborative evidence and proper examination of all involved parties.

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