2015 (7) TMI 502 - AT - Central Excise

Clandestine manufacutre and removal of goods - Retracted confessional statements - whether there was a clandestine removal of the raw materials imported by the appellant on which Modvat credit was taken - Held that - It is observed that adjudicating authority is relying upon the opinion given by Shri Anand Tukaram Sardar, Manager of the appellant given before the date of Panchnama but not giving any credit to the opinion given the same person under affidavit dated 20.10.2014, that weight of metal container could be 1.25Kg and weight of metal component set of one container could be 1.5 Kg. Once the same person is giving contradictory opinion then none of these opinions is acceptable. Adjudicating authority should have only restricted to the calculations submitted by the appellant, as per remand directions (without giving any credence to the contradictory opinion given by the same person). Further, jurisdictional Gujarat High Court in the case of CCE vs. Saakeen Alloys Private Limited (2014 (5) TMI 606 - GUJARAT HIGH COURT) has held that only confessional statements can not be made the sole basis of clandestine removals. It is observed from the representative copies of the bills of entry relied upon by the appellant that only the highest guage of the metal sheet imported is given and lower limit of thickness or actual thickness in a consignment is not available. As per the cross-examination of Shri B.K. Verma, Superintendent, who investigated this case, it has come out that the thickness of materials imported by the appellant varies. It is also clear from the cross-examination of the investigating officer that the thickness of the metal sheets was not verified as the thickness is not mentioned in the sale documents and also due to the fact that Manager-cum-Authorised signatory and the Proprietor of the appellant gave clear admissions of the weight of the container. The findings recorded by the adjudicating authority, that calculations submitted by the appellant are not accepted, can not be upheld in the absence of any evidence on record that all the metal sheets imported by the appellant, used for manufacture of container, had uniform thickness and weight. - Decided in favour of assessee.

Summary

Issues Involved:
- Clandestine diversion of raw materials imported by the appellant for manufacturing metal containers and components.
- Calculation discrepancies and method of weighing containers.
- Reliance on statements and affidavits of involved parties.
- Legal validity of penalties imposed and demand confirmed by adjudicating authority.

Issue 1: Clandestine Diversion of Raw Materials
The appeal addressed the issue of whether the appellant clandestinely diverted raw materials imported for manufacturing metal containers and components, leading to a demand of Rs. 33,94,591/- being confirmed along with penalties under the Central Excise Act, 1944. The appellant contested the allegations, citing previous rounds of litigation and arguing that the Department's case lacked tangible evidence, relying on the absence of retailer evidence and citing legal precedent to challenge the findings based on presumption. The Tribunal remanded the case multiple times for reevaluation, emphasizing the need for independent corroborative evidence to support the Department's allegations. The appellant highlighted discrepancies in the weight calculations based on the thickness of imported metal sheets, challenging the Department's method of calculation and asserting that the demand was illogical, arbitrary, and unsustainable.

Issue 2: Calculation Discrepancies and Weighing Method
The appellant disputed the Department's calculation of shortages in raw materials, presenting bills of entry and arguing that the weight of containers varied due to the thickness of metal sheets used. The appellant's representative emphasized the importance of considering the varying thickness of imported metal sheets, supported by cross-examination evidence showing inconsistencies in sheet thickness. The Tribunal found that the adjudicating authority erred in rejecting the appellant's calculations without evidence of uniform thickness and weight in the imported metal sheets, ultimately concluding that the appeal should be allowed based on the lack of substantiated evidence supporting the Department's position.

Issue 3: Reliance on Statements and Affidavits
The adjudicating authority relied on statements and opinions provided by involved parties, particularly focusing on the contradictory statements of the Manager of the appellant regarding the weight of metal containers and components. The Tribunal criticized the authority for not crediting the later contradictory opinion of the same individual, emphasizing that contradictory opinions from the same source could not be accepted as reliable evidence. The Tribunal highlighted the importance of adhering to remand directions and considering only the calculations submitted by the appellant, as per legal precedent that confessional statements alone could not establish clandestine removal.

Issue 4: Legal Validity of Penalties and Demand
The Tribunal, after examining the case records and considering the factual matrix, concluded that the Department's case against the appellant for clandestine removal lacked substantial evidence. The Tribunal emphasized the absence of detected shortages in raw materials and the lack of seizure of cash related to alleged selling of raw materials. Furthermore, the Tribunal criticized the adjudicating authority for not upholding the appellant's calculations due to insufficient evidence of uniform thickness and weight in the imported metal sheets. Consequently, the Tribunal allowed the appeal filed by the appellant, providing consequential relief as necessary.

This comprehensive analysis of the judgment highlights the key issues addressed, the arguments presented by both parties, the Tribunal's evaluation of the evidence, and the ultimate decision reached in favor of the appellant based on the lack of substantial evidence supporting the Department's allegations.