2005 (7) TMI 96 - AT - Central Excise

Appellant Tobacco Manufacturers allegation of clandestine removal of branded chewing tobacco - nothing incriminating was found in the factory premises of the appellants during raids - evidence gathered during the course of this investigation is found insufficient to establish unaccounted production and clandestine removal of Jarda as alleged demand not justified appeal allowed on merits

Issues Involved:

1. Clandestine removal of branded chewing tobacco.
2. Confirmation of demand of duty.
3. Imposition of penalty on various appellants.
4. Reliability of statements and documents as evidence.
5. Procedural fairness and principles of natural justice.

Detailed Analysis:

1. Clandestine Removal of Branded Chewing Tobacco:

The Revenue's case was based on the interception of a vehicle carrying 90 cartons of "Gai Chhap Patel Jarda" without proper excise documentation, suggesting clandestine removal by M/s. RKPTM. The investigation revealed unaccounted raw tobacco and packing materials, leading to the conclusion of illicit activities. However, the appellants argued that their factory was raided multiple times without finding any incriminating evidence, and they attributed the allegations to family disputes and business rivalry.

2. Confirmation of Demand of Duty:

The Commissioner confirmed the duty demand based on the unaccounted raw tobacco and the alleged clandestine removal of finished goods. The demand was calculated considering the manufacturing loss and the value of similar goods. The Tribunal, however, found that the evidence provided, including statements and documents, lacked consistency and corroboration. The Tribunal noted that many statements were retracted and there was no substantial evidence of unaccounted raw material or production.

3. Imposition of Penalty on Various Appellants:

Penalties were imposed on partners, employees, and others under Rule 209A of the Central Excise Rules, 1944. The Tribunal observed that the penalties were based on statements and documents that were not conclusively linked to the appellants. Given the lack of corroborative evidence and the procedural lapses in the investigation, the Tribunal found the imposition of penalties unsustainable.

4. Reliability of Statements and Documents as Evidence:

The Tribunal scrutinized the reliability of the statements recorded under Section 14 of the Central Excise Act, noting that many were retracted and inconsistent. The Tribunal emphasized that statements recorded under duress or coercion, without corroborative evidence, cannot be relied upon. Documents such as transport receipts and goods challans were found to be vague and lacking proper acknowledgment from the appellants, further weakening the Revenue's case.

5. Procedural Fairness and Principles of Natural Justice:

The appellants contended that they were denied the opportunity to cross-examine key witnesses, which was a significant procedural lapse. The Tribunal highlighted the importance of procedural fairness, noting that the lack of cross-examination and the reliance on retracted statements violated the principles of natural justice. The Tribunal also criticized the Commissioner for relying on documents and statements not listed in the Show Cause Notice, further undermining the fairness of the proceedings.

Conclusion:

The Tribunal set aside the impugned order, finding that the evidence was insufficient to establish clandestine removal and unaccounted production. The penalties and duty demand were deemed unsustainable due to procedural lapses and lack of corroborative evidence. The appeals were allowed with consequential relief to the appellants.

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