2013 (7) TMI 535 - AT - Central Excise

Clandestine removal Demand of an amount of Rs. 1,85,10,861/- is based on the note books and pen-drive recovered from the premises of M/s. Sunrise Enterprises, Mehsana(third party), who was a dealer of M/s. Sakeen Alloys Pvt. Limited, Mehsana(appellant) Held that - In a clandestine removal case - Facts of clandestine removal of excisable goods cannot be established only on the basis of certain statements which are retracted later - But there has to be positive evidences like purchase of excess raw materials, shortage/ excess of raw materials/ finished goods found in the stock/ factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions are made in cash. From annexures of the SCN, observed that there were huge cash transactions to the tune of Rs. 11.23 Crores - When such large number of transactions involving huge amounts being undertaken in clandestine removal activities, it is very likely that some cash would have been seized - There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/ finished goods were found either short or in excess in the factory premises of the appellant or at any other place - As per the Panchnama drawn at the factory premises, shown that there was no excess/ shortage of the raw materials or finished goods found - The documentary evidences collected from the business premises of M/s. Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities being undertaken by the appellant. However, such a suspicion or doubt, to be strengthened by positive evidences which seem to be lacking in the case. Any suspicion whosoever cannot take the place of evidence regarding clandestine removal of excisable goods. Moreover, after having positive evidences, quantification of duty on clandestinely removed goods also becomes essential. As already mentioned above, the stock lying in the stock yard of M/s. Sunrise Enterprise, Mehsana was found containing the goods received from M/s. Sakeen Alloys Pvt. Limited under proper invoices. When the goods received under proper invoices are found in the stock yard of M/s. Sunrise Enterprise, then it is possible that out of such goods certain quantities were sold to various customers by accepting payment in cash. In such a situation, the quantification undertaken by the investigation becomes doubtful and incorrect. For this purpose cross-examination of the person Incharge looking after the records of M/s. Sunrise Enterprise was must, which was not allowed by the adjudicating authority. In view of the above observations, the demand of duty of Rs. 1,85,10,861/- is not sustainable and is required to be set-aside Decided in favor of Assessee. Clandestine removal - Demand of Rs. 8,25,277/- is based on the parallel invoices recovered as sealed envelopes from the business premises of transporter M/s. Khodiyar Transport Services, Mehsana Held that - positive evidence in the form of parallel invoices issued by the appellant are available and the same have been confirmed by the proprietor of transporter M/s. Khodiyar Transport and the same have been affirmed by independent witness other than the manufacturer of the goods. Therefore, the duty demand of Rs. 8,25,277/- pertaining to clandestine removal of goods on parallel invoices is upheld and the appellants are liable to penal action under the provisions of the Central Excise Act and Central Excise Rules. Decided against the Assessee.

Issues Involved:
1. Cladestine removal of goods based on records/pen-drive recovered from M/s. Sunrise Enterprises.
2. Denial of cross-examination of key witnesses.
3. Validity of evidence from third parties.
4. Demand of duty based on parallel invoices recovered from the transporter.

Issue-wise Detailed Analysis:

1. Cladestine Removal of Goods Based on Records/Pen-drive Recovered from M/s. Sunrise Enterprises:
The primary issue revolves around the demand of Rs. 1,85,10,861/- based on the records and pen-drive recovered from M/s. Sunrise Enterprises, a dealer of M/s. Sakeen Alloys Pvt. Limited. The appellants argued that the goods found in the stockyard of M/s. Sunrise Enterprises were marked 'VARSANA' and not manufactured by the appellant. They contended that the allegation of clandestine removal cannot be substantiated solely on the records or pen-drive recovered from a third-party's premises. The Tribunal observed that the stock in the stockyard tallied with the invoices, indicating proper documentation. The Tribunal emphasized the necessity of cross-examination to ascertain the truth behind the records/pen-drive.

2. Denial of Cross-examination of Key Witnesses:
The appellants' requests for cross-examination of key witnesses, including the person in charge of M/s. Sunrise Enterprises and the transporter, were denied by the adjudicating authority. The Tribunal noted that cross-examination is crucial, especially when statements are retracted, to uphold the principles of natural justice. The Tribunal referred to several judgments, including the Hon'ble Supreme Court's ruling in Shalimar Rubber Industries, which held that without cross-examination, statements cannot be the sole basis for concluding clandestine removal.

3. Validity of Evidence from Third Parties:
The Tribunal highlighted that evidence from third parties, such as records maintained by M/s. Sunrise Enterprises, cannot be solely relied upon without corroborative evidence. The Tribunal cited various cases, including the Hon'ble High Court's ruling in CCE vs. Omkar Textiles, which emphasized that the onus is on the Revenue to provide concrete evidence beyond confessional statements. The Tribunal found that no investigation was conducted at the suppliers' end, and no buyers of the finished goods were examined to confirm the clandestine removal.

4. Demand of Duty Based on Parallel Invoices Recovered from the Transporter:
The demand of Rs. 8,25,277/- was based on parallel invoices recovered from the premises of M/s. Khodiyar Transport Services. The Tribunal upheld this demand, noting that positive evidence in the form of parallel invoices was available and confirmed by the transporter and an independent witness. Consequently, the Tribunal imposed penalties on M/s. Sakeen Alloys Pvt. Limited and individuals involved, including the Managing Director and the proprietors of M/s. Sunrise Enterprises and M/s. Khodiyar Transport Service.

Conclusion:
The Tribunal set aside the demand of Rs. 1,85,10,861/- due to lack of corroborative evidence and denial of cross-examination, but upheld the demand of Rs. 8,25,277/- based on parallel invoices. Penalties were imposed accordingly. The appeals were allowed by modifying the adjudicating authority's order to this extent.

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