2016 (12) TMI 1635 - AT - Central Excise

Clandestine removal - shortages and excesses of stock and finished goods - The learned Commissioner (Appeals) held that in the facts and circumstances, confiscation of seized goods is not proper as the goods were still lying in the factory premises, and there is no evidence of clandestine removal - cross examination of witnesses - natural justice - confiscation - penalty. Held that - the ld. Commissioner (Appeals) have rightly held that there has been failure on the part of the Additional Commissioner to comply with the directions given by the ld. Commissioner (Appeals) in the earlier gound of litigation. Also, Revenue have not been able to controvert that the witnesses were not the persons brought along with the search team. Under the provisions of the Criminal Procedure Code, such witnesses have to be persons of repute staying in the near vicinity or the locality where the search or seizure takes place. Such provisions have been admittedly not followed. The proceedings are vitiated and the adverse conclusions drawn by the Additional Commissioner have been rightly held to be unsustainable by the ld. Commissioner (Appeals) - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Confiscation of seized goods.
2. Alleged clandestine removal.
3. Validity of Panch witnesses.
4. Compliance with procedural requirements.
5. Burden of proof on the Revenue.
6. Principles of Natural Justice.

Detailed Analysis:

1. Confiscation of Seized Goods:
The Revenue appealed against the Order-in-Appeal which set aside the confiscation of goods found during inspection at the respondent's factory. The Commissioner (Appeals) held that confiscation was improper as the goods were still lying in the factory premises with no evidence of clandestine removal. The Revenue argued that under Rule 25(1)(b) of Central Excise Rules, 2002, goods not accounted for, even without intent to remove clandestinely, are liable to confiscation. However, the Tribunal upheld the Commissioner (Appeals)'s decision, noting that the goods were not proven to be intended for clandestine removal.

2. Alleged Clandestine Removal:
The Commissioner (Appeals) found no evidence of any attempt to clandestinely remove the goods found in excess within the factory premises. The Tribunal concurred, emphasizing that the burden of proof lies on the Revenue to demonstrate intent for clandestine removal, which was not established beyond doubt in this case.

3. Validity of Panch Witnesses:
The Commissioner (Appeals) criticized the validity of the Panch witnesses, noting that they were not local and were brought by the officials, which raised doubts about their genuineness. The Tribunal supported this view, stating that under the Criminal Procedure Code, witnesses should be reputable persons from the vicinity of the search location. The failure to adhere to this requirement rendered the Panchnama proceedings void-ab-initio.

4. Compliance with Procedural Requirements:
The Tribunal noted repeated failures by the Adjudicating Authority to comply with the Commissioner (Appeals)'s directions to allow cross-examination of Panch witnesses. Summons issued to the witnesses were returned undelivered, and no further effective steps were taken to ensure their presence. This non-compliance violated procedural norms and the principles of natural justice.

5. Burden of Proof on the Revenue:
The Tribunal reiterated that the entire burden of proving its case lies on the Revenue, which must produce cogent and tangible evidence. The reliance on a questionable Panchnama without substantial evidence did not meet the required standard of proof. The Tribunal cited the case of Bhillai Conductors Pvt. Ltd., emphasizing that proof beyond doubt is necessary for allegations of clandestine removal.

6. Principles of Natural Justice:
The Tribunal found that the Adjudicating Authority violated the principles of natural justice by not providing the opportunity for cross-examination of witnesses as directed. This failure undermined the fairness of the proceedings and justified the setting aside of the confiscation and penalties.

Conclusion:
The Tribunal dismissed the Revenue's appeals and upheld the Commissioner (Appeals)'s order, emphasizing the lack of evidence for clandestine removal, the questionable validity of Panch witnesses, and the procedural lapses that violated natural justice principles. The respondents were entitled to consequential benefits in accordance with the law.