2014 (2) TMI 61 - AT - Central Excise

Waiver of pre-deposit - Clandestine removal of goods - Held that - Representatives of the main appellant and the authorized signatory of the main appellant had, in their statements, indicated that there was some wrong doing in the manufacturing and clearing of Gutkha. The defences put by the ld. Counsel that such persons were not produced for cross-examination or had retracted the statement, is a question of facts which needs detailed verification. We find that the adjudicating authority has confirmed the demand by working back the quantity manufactured by the main appellant based upon the statements given by the lamination manufacturers. In our prima facie view, this could be a presumptuous way of coming to a conclusion that there was clandestine manufacture and clearance of Gutkha, in as much as we find that there are few evidences which would indicate that the other inputs which were required for manufacturing of Gutkha was also procured were unaccounted - these appellants were penalized on the ground that they had abetted the plan executed by the main appellant for clearance of the Gutkha without payment of duty - Decided against assessee.

Summary

Issues Involved:
1. Waiver of pre-deposit for the main appellant and associated parties.
2. Confirmation of duty liability with interest and imposition of penalties.
3. Denial of cross-examination of witnesses.
4. Basis for demand of duty.
5. Role of suppliers and job workers.
6. Violation of principles of natural justice.
7. Financial hardships claimed by the main appellant.

Detailed Analysis:

1. Waiver of Pre-deposit for the Main Appellant and Associated Parties:
The Tribunal addressed the Stay Petitions filed for waiver of pre-deposit of the amounts involved. Considering the interconnected issues arising from the same Order-in-Original, a common order was issued. The main appellant, M/s Yogesh Associates, was directed to deposit Rs. 10 Crores, while other appellants such as M/s Sachin Perfumery & Cosmetics, M/s Arihant Polysacks, and M/s Sunrise Panmasala Products Pvt. Ltd. were each directed to deposit Rs. 50 lakhs. Shri Arun Joshi was directed to deposit Rs. 2 Crores. For M/s Balaji Flexipack and associated individuals, the pre-deposit of penalties was waived due to the violation of principles of natural justice.

2. Confirmation of Duty Liability with Interest and Imposition of Penalties:
The adjudicating authority confirmed the duty liability with interest on M/s Yogesh Associates and imposed penalties under the Central Excise Rules, 2002, on the grounds of evasion of duty through clandestine removal of Gutkha. The penalties were also imposed on suppliers and individuals for abetting the evasion.

3. Denial of Cross-examination of Witnesses:
The main appellant argued that the adjudicating authority erred by not allowing cross-examination of Pancha witnesses and other individuals whose statements were used to determine the duty liability. The Tribunal noted that the issue of cross-examination and retraction of statements was a factual matter requiring detailed verification.

4. Basis for Demand of Duty:
The main appellant contended that the demand was based on presumptive production calculated from the quantity of laminations supplied, without concrete evidence of procurement of other raw materials necessary for manufacturing Gutkha. The Tribunal found that the adjudicating authority's conclusion of clandestine manufacture was presumptive, lacking evidence of procurement of other inputs.

5. Role of Suppliers and Job Workers:
Suppliers of sacks and perfumes argued that they had cleared goods on payment of duty and were penalized solely because the consignee's name was improperly indicated or non-existent. Job workers contended that penalties were imposed without concrete evidence, despite maintaining records of job work. The Tribunal noted that the roles of these parties needed detailed examination during the final disposal of appeals.

6. Violation of Principles of Natural Justice:
M/s Balaji Flexipack and associated individuals claimed that the adjudicating authority proceeded without hearing them or acknowledging their requests for correspondence to be directed to their new address. The Tribunal found that the adjudicating authority's actions violated principles of natural justice and waived the pre-deposit of penalties for these parties.

7. Financial Hardships Claimed by the Main Appellant:
The main appellant claimed severe financial hardships, presenting a balance sheet for the year ending 31.03.2011. The Tribunal found the claim unsubstantiated due to the absence of subsequent balance sheets and determined that the financial hardship argument was weak.

Conclusion:
The Tribunal directed the main appellant and certain other appellants to deposit specified amounts for hearing and disposing of the appeals. The role of each individual and company involved was to be examined in detail during the final disposal of the appeals. The Tribunal waived the pre-deposit of penalties for M/s Balaji Flexipack and associated individuals due to the violation of principles of natural justice. Compliance with the deposit directions was required by 20.03.2014, with a compliance report to be submitted by 27.03.2014.