2016 (7) TMI 151 - AT - Central Excise

Clandestine removal of goods - manufacture of Cotton yarn falling under Chapter 52 - for the period from 01.01.1999 to 17.09.1999 - whether the appellant herein had indulged in the manufacture of dutiable cotton yarn in cones without accounting the same in the statutory records and clearing the said cotton yarn in cones clandestinely without payment of duty and without recording the said transactions in the statutory records. Held that - This is not just a case where there is a demand arisen on account of difference between the private records and the RG.1 registers but as per the record that there has also been corroboration with the shortages noticed in the raw material account. In the instant case, there have been confessional statements although there has been a retraction of the said statements. It is to be noted that retractions, as rightly observed by the lower authorities were merely an after-thought and if the case of the department is just based on the retracted statements, the appellant could possibly have a reasonable case to contest but in the instant case, there have been confessional statements, private registers and those private registers also substantially matched with the shortages. All these factors cumulatively would show that the conclusion arrived at by the authorities cannot be faulted with. While it is true that the burden to prove clandestine removal is on the department, it cannot be expected of the department to prove the same with mathematical accuracy and precision as clandestine removal is a suruptious activity and in such type of cases, direct evidence would very rarely be forthcoming which would prove a case beyond all reasonable doubts. - Demand confirmed - Decided against the assessee.

Summary

Issues Involved:
1. Validity of statements obtained under coercion.
2. Denial of cross-examination.
3. Basis of demand determination and quantification discrepancies.
4. Reliance on private records for clandestine removal allegations.
5. Imposition of penalty under Rule 209A of the Central Excise Rules, 1994.

Detailed Analysis:

1. Validity of Statements Obtained Under Coercion:
The appellant argued that the statements dated 18.09.1999 and 30.09.1999 were obtained under coercion and were retracted immediately. The retractions were acknowledged by both the Original Authority and the Lower Appellate Authority. The appellant relied on the Tribunal's decision in Rattan Steel Works Vs. CCE, Chennai. However, the Tribunal noted that the retractions appeared to be an after-thought and were not sent by registered post, raising suspicion about their authenticity.

2. Denial of Cross-Examination:
The appellant contended that their request for cross-examination of third-party statements and witnesses was not considered, violating the principles of natural justice. The Tribunal acknowledged this issue but concluded that the denial of cross-examination did not result in a violation of natural justice, given the clear material evidence and confessional statements.

3. Basis of Demand Determination and Quantification Discrepancies:
The appellant challenged the demand determination based on visual examination rather than actual weighment, citing discrepancies in the quantification of demand. The Tribunal referred to the case of Malwa Cotton Spinning Mills Ltd Vs. CCE, Chandigarh, which emphasized the necessity of actual weighment. Despite these arguments, the Tribunal found that the lower authorities' determination was based on substantial evidence, including private records and confessional statements.

4. Reliance on Private Records for Clandestine Removal Allegations:
The appellant argued that the demand was based solely on retracted statements and private records without corroborative evidence. The Tribunal, however, found that the private records, confessional statements, and material evidence collectively substantiated the allegations of clandestine removal. The Tribunal cited various case laws, including CCE Madurai Vs. Madras Suspensions Ltd., to support the necessity of corroborative evidence in clandestine removal cases.

5. Imposition of Penalty Under Rule 209A of the Central Excise Rules, 1994:
The penalty of ?10,000/- imposed on Shri C. Sundaramurthy under Rule 209A was contested. The Tribunal noted that for a penalty under Rule 209A, there must be a finding that the person knowingly dealt with excisable goods liable for confiscation. The Tribunal found no such allegation against Shri C. Sundaramurthy and referred to the decision in Farwood Industries (P) Ltd. Vs. CCE Chennai, which vacated a similar penalty due to the absence of such findings. Consequently, the penalty on Shri C. Sundaramurthy was set aside.

Conclusion:
The Tribunal dismissed the appeal filed by M/s. Lawn Textile Mills Pvt. Ltd., finding no reason to interfere with the order passed by the Commissioner (Appeals). However, the appeal filed by Shri C. Sundaramurthy was allowed, and the penalty of ?10,000/- imposed on him was set aside.