2010 (11) TMI 275 - HC - Central Excise

Clandestine manufacture and removal - Demand of excise duty and penalty - Evidence - The respondent is the manufacturer of Shimla brand of Gutkha , but the consignment has not been seized at the time of its transportation from the factory of the respondent - The goods are seized on the ground of Clandestine manufacture and removal without payment of duty excise duty and penalty by respondent at Indor - Appellant has failed to point out from the record any material, which could establish that the seized goods were manufactured by the respondent or they were being transported at the instance of the respondent or they were cleared from the factory premises of the respondent clandestinely without payment of the excise duty - Merely, because the seized item was Gutkha bearing brand name Shimla and there is admission of Nitesh Wadhwani that he was also manufacturing Gutkha by brand name Shimla , only on that basis it cannot be conclusively held that the seized item was manufactured and cleared by the respondent - The written explanation of the respondent that the seized item was not manufactured by it, but was a duplicate product and the reasons given by him indicating that it was a duplicate product cannot be ignored . The revenue has failed to produce even a single piece of evidence that the seized goods were manufactured by the respondent or they were clandestinely removed without payment of excise duty from the factory premises of the respondent - The revenue has sought to levy excise duty and penalty on the respondent merely on the basis of assumptions and presumptions and such a course is not permissible in law - Thus, question is answered by holding that for want of evidence, the Tribunal was justified in not fastening the liability on the respondent and dropping the proceedings against him.

Summary

Issues Involved:
1. Justification of the Tribunal's decision regarding the absence of evidence and liability under the Central Excise Act.
2. Consideration of Nitesh Wadhwani's statement and its impact on implicating the respondent company.
3. Sufficiency of Nitesh Wadhwani's statement to initiate action and impose penalties under the Act.

Detailed Analysis:

1. Justification of the Tribunal's Decision:
The appellant argued that the Tribunal erred in dropping proceedings against the respondent and not imposing liability for excise duty and penalty. The respondent countered that there was no evidence of manufacturing and clearing the goods without excise duty. The Court noted that the substantial questions of law were indeed involved.

The consignment was seized in Chennai, not during transportation from the respondent's factory. No evidence connected the respondent with the seized goods. Statements from employees of M/s. Balaji Cargo Forwarders and M/s. Vaishali Cargo Carrier did not implicate the respondent. The respondent claimed the seized goods were not theirs and suspected them to be duplicates. The respondent's records were seized by excise authorities, making it impossible for them to produce evidence. The Deputy Commissioner found no evidence that the goods were manufactured and cleared by the respondent without paying excise duty. This finding was upheld by the Commissioner (Appeals) and CESTAT. The Court found no material evidence to establish the respondent's involvement, thus supporting the Tribunal's decision.

2. Consideration of Nitesh Wadhwani's Statement:
Nitesh Wadhwani admitted to manufacturing Gutkha under the brand "Shimla" but denied knowledge of the seized goods' transportation to Chennai. He claimed the seized goods were duplicates and not sold by him in Delhi. The Court noted that merely because the seized item bore the brand "Shimla" and Wadhwani admitted to manufacturing under that brand, it could not conclusively prove the goods were manufactured and cleared by the respondent. The written explanation provided by the respondent, indicating the goods were duplicates, was considered valid. The statement lacked admission that the seized product was manufactured by the respondent or cleared without excise duty, making it insufficient to initiate action or impose penalties.

3. Sufficiency of Nitesh Wadhwani's Statement:
The Deputy Commissioner and the Tribunal duly considered Wadhwani's statement. The Tribunal noted the statement in its order and did not ignore it while affirming the findings of the Deputy Commissioner and Commissioner (Appeals). The Court found that without cogent evidence, Wadhwani's statement alone could not fasten liability for excise duty and penalties on the respondent.

Conclusion:
The appeal was dismissed, and all three questions were answered against the revenue and in favor of the respondent. The Court emphasized that excise duty and penalties could not be imposed based on assumptions and presumptions without tangible evidence.