2016 (12) TMI 845 - HC - Central Excise

Whether the statement recorded under Section 14 of the Central Excise Act, 1944 is admissible when they were found to be given voluntary. Moreover without any coercion or duress? - Held that - when shortage is there the mere factum of shortage cannot justify an inference of clandestine removal of molasses but in order to attribute an act of clandestine removal upon Assessee either there must be a clear admission to this effect on the part of Assessee or its representative or it must be corroborated by further credible evidence that there is clandestine removal of molasses but on mere statement and that tooo of the kind of statement as we have noticed above, it cannot be said that there is an admission and no further corroboration is required. Question answered holding statement under Section 14 of Act 1944 is admissible but mere statement will not be sufficient to justify an inference of clandestine removal unless there is some corroborative material or statement contains clear admission of clandestine removal and that is not retracted subsequently or explained. However, if it is subsequently retracted or explanation is furnished then it has to be looked into the said admission and authority must have corroborative material and cannot base its finding under Section 14 of Act 1944. Whether retraction of earlier statement would not amount to detract its acceptability? - Held that - in the present case as we have already held that there was no admission on the part of official concerned so as to hold that Assessee admitted clandestine removal, it cannot be said that there was any issue of acceptability of retracted statement or change to earlier statement. Question therefore, is also answered in favour of Assessee and against Revenue. Whether the party correctly availed the Modvat credit of ₹ 57,60,900/-? - Whether the shortage of 115218 qtls. of molasses does not amount disposal molasses in a manner other than provided under Rule 57F of Central Excise Rule? - question answered against Revenue and in favour of Assessee since there is no sufficient evidence to show that there was a clandestine removal. Appeal allowed - decided in favor of assessee.

Summary

Issues:
Interpretation of the admissibility of statements under Section 14 of the Central Excise Act, 1944; Retraction of statements and its impact on acceptability; Correct availing of Modvat credit; Allegations of disposal of molasses contrary to Central Excise Rule 57F.

Analysis:

Admissibility of Statements under Section 14:
The High Court considered the admissibility of statements recorded under Section 14 of the Central Excise Act, 1944. Referring to a Division Bench judgment of the Gujarat High Court, it was established that a statement recorded under this section need not be proved with corroborative material. The Court emphasized that in the absence of such material, no demand can be raised solely based on the statement. The Court highlighted that if an Assessee retracts a statement and provides an explanation for any shortages, the statement alone cannot justify an inference of clandestine removal. The Court clarified that for an admission to be valid, there must be clear corroboration or an unambiguous admission without subsequent retraction or explanation. Therefore, the Court held that the admissibility of statements under Section 14 is subject to the presence of corroborative evidence or an unambiguous admission that is not retracted or explained later.

Impact of Retraction on Acceptability:
Regarding the impact of retraction on the acceptability of statements, the Court found that in the case at hand, there was no admission of clandestine removal by the official concerned. Consequently, the Court ruled that since there was no initial admission, the issue of retraction or change to an earlier statement did not arise. Therefore, the Court concluded in favor of the Assessee on this issue.

Availing of Modvat Credit and Allegations of Molasses Disposal:
Based on the findings related to the admissibility of statements and the absence of admission of clandestine removal, the Court also addressed the questions concerning the correct availing of Modvat credit and allegations of disposal of molasses contrary to Central Excise Rule 57F. The Court ruled in favor of the Assessee on these issues as well, as there was insufficient evidence to support the claims of clandestine removal. Consequently, the Court answered all the questions against the Revenue and in favor of the Assessee, ultimately disposing of the reference accordingly.