2016 (4) TMI 56 - AT - Central Excise

Clandestine clearance - goods cleared twice - unaccounted acquisition/procurement of inputs - Held that - Revenue is based on only statement of the proprietors of company, two buyers namely, Jay Enterprises and Krishna Marketing which were subsequently retracted and the stand have been consistently maintained by them in the course of cross-examination to the effect that they have neither received any non-duty paid goods nor they were instructed by the officers of the manufacturer to return invoices/documents. The appellant admitted that there are only 8 invoices available in the relied upon documents, against which it appears that the goods have been cleared twice. The appellant have clearly agreed to confirmation of demand attributable to all these 8 invoices, the clearance value of which totals ₹ 7,31,140,17 along with interest. It is further seen from the record that other than the 8 invoices, there is no evidence produced by the Revenue in support of the allegation of clandestine removal as alleged on the basis of parallel invoices. It is settled law that clandestine clearance as alleged by Revenue, the onus is on the Revenue to produce copies of the invoices etc. in support of its allegation. In the absence of such parallel invoices, the allegation cannot survive. Further, find that the Revenue have not brought anything on record to support any unaccounted acquisition/procurement of inputs(raw materials). Rather the inputs of the appellant are acquired from the PSU and the same are duly accounted for and duty paid. Thus, it appears that the Revenue have made out a half baked case of clandestine removal and the same is not sufficient save and except the 8 parallel invoices as noticed herein above and accepted by the appellant. Further, it is settled law that a confessional statement cannot be the sole basis for establishing clandestine clearance in absence of other corroborative evidence. The duty on the value of clandestine clearance of ₹ 7,31,140.17 have been worked out by the Revenue on the direction of the Tribunal @ ₹ 92,144/-. Accordingly, the balance demand is set aside. The appellant is accordingly ordered to pay the above amount along with interest, which can be adjusted against the amount of pre-deposit of ₹ 20 lakhs and additional amount of ₹ 5 lakhs, lying with the department against encashment of Bank Guarantee. Further, equal amount of penalty of ₹ 92,144/- is retained against the appellant ICCONOL Petroleum Products under Section 11AC read with Rule 25 of Central Excise Rules, 2002. The personal penalty imposed on the Managing Director Mr. Tushar Shah and Mr. D.K. Singh, Director of the appellant under Rule 26 of Central Excise Rules are reduced to ₹ 15,000/- each. The penalties under Rule 26 on Krishan Marketing, Blue Spot Agencies and Jay Enterprises are set aside. The confiscation of the goods valued at ₹ 2,35,650/- at the premises of Krishna Marketing is also set aside. - Decided partly in favour of assessee

Issues Involved:
1. Alleged clandestine removal of goods.
2. Supply and return of Central Excise invoices.
3. Non-provision of relied upon documents and denial of cross-examination.
4. Validity of retracted statements.
5. Calculation and correctness of duty demand.
6. Invocation of extended period of limitation.
7. Imposition of penalties and confiscation.

Issue-wise Detailed Analysis:

1. Alleged Clandestine Removal of Goods:
The appellant, M/s ICCONOL Petroleum Pvt. Ltd., was accused of clandestine removal of goods based on discrepancies between octroi receipts and invoices, and the discovery of multiple invoices with the same serial numbers. The investigation revealed that goods were allegedly cleared to Jay Enterprises and Krishna Marketing without proper excise documentation. Statements from these buyers indicated that they returned invoices and lorry receipts to the appellant, suggesting a pattern of evasion.

2. Supply and Return of Central Excise Invoices:
The investigation found that invoices were returned to the appellant after goods were delivered, which was corroborated by statements from the buyers. However, these statements were later retracted, with the buyers claiming coercion. The appellant argued that invoices were issued to different parties for commercial reasons and that proper excise duty had been paid.

3. Non-provision of Relied Upon Documents and Denial of Cross-examination:
The appellant repeatedly requested copies of relied upon documents and the opportunity to cross-examine witnesses, which were not fully granted. The adjudicating authority allowed cross-examination of some witnesses but denied it for the investigating officers, stating their actions were in an official capacity. The Tribunal acknowledged the appellant's claim that not all documents were provided, which affected their ability to defend themselves.

4. Validity of Retracted Statements:
The retracted statements of the buyers were considered crucial. Initially, the buyers admitted to returning invoices but later retracted, claiming coercion. The Tribunal noted that these retractions weakened the Revenue's case, as consistent statements during cross-examination denied any non-duty paid goods were received.

5. Calculation and Correctness of Duty Demand:
The appellant contested the duty demand, arguing that the demand was based on assumptions and incorrect calculations. The Tribunal found that only 8 invoices were substantiated as being used for clandestine removal, with a total value of Rs. 7,31,140.17. The duty on these invoices was calculated at Rs. 92,144/-. The remaining demand was based on assumptions without concrete evidence and was thus set aside.

6. Invocation of Extended Period of Limitation:
The Tribunal upheld the invocation of the extended period of limitation under Section 11A, given the established case of clandestine removal for the 8 invoices. However, the lack of evidence for the remaining demand meant that the extended period could not be justified for those amounts.

7. Imposition of Penalties and Confiscation:
The penalties imposed on the appellant and its directors were reviewed. The Tribunal reduced the personal penalties on the Managing Director and Director to Rs. 15,000 each and set aside penalties on Krishna Marketing, Blue Spot Agencies, and Jay Enterprises. The confiscation of goods valued at Rs. 2,35,650 was also set aside.

Conclusion:
The Tribunal allowed the appeal in part, confirming the duty demand and penalty only for the substantiated 8 invoices. The remaining demand, penalties, and confiscation were set aside due to lack of evidence and procedural lapses in providing documents and allowing cross-examination. The Tribunal emphasized the importance of adhering to principles of natural justice and the need for concrete evidence in cases of alleged clandestine removal.

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