2017 (3) TMI 773 - AT - Central Excise

Validity of Assessment order - Natural justice - certain documents recovered from two ex-employees formed basis of enquiry and assessment order by Commercial Taxes Department - Held that - the Original Authority declined the requests of the appellants for cross-examining various persons who conducted the investigation or whose statements were relied upon. The reason recorded by the Original Authority is neither satisfactory nor legally sustainable. The allegation of unaccounted manufacture and clearance is a serious charge which requires corroboration with sustainable evidence which is lacking in the present case - The Revenue has failed to even prima facie establish the existence of a sustainable case of unaccounted manufacture and clearance - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Delay in adjudication.
2. Reliance on the assessment order of the Commercial Taxes Department.
3. Standard for electricity consumption.
4. Production capacity and alleged excess production.
5. Lack of corroborative evidence for unaccounted goods.
6. Evidence and corroboration regarding suppliers of MS Ingots.

Issue-wise Detailed Analysis:

1. Delay in Adjudication:
The appellants argued that there was an almost 10-year delay in passing the adjudication order, which violated the Board’s instruction to issue orders within one month of the date of personal hearing. They relied on cases like Shirish Harshavadan Shah vs. DD, Enforcement Directorate and Lanvin Synthetics Private Ltd. vs. Union of India to assert that such unexplained delays vitiate the proceedings. The Tribunal noted this delay, highlighting that the Original Authority’s reasons for denying cross-examination requests were unsatisfactory and legally unsustainable. The Tribunal found the delay factually incorrect and fallacious, emphasizing that the Original Authority delayed adjudication for over nine years without recording reasons.

2. Reliance on the Assessment Order of the Commercial Taxes Department:
The appellants contended that the demand proceedings were based entirely on the assessment order dated 10/08/2004 by the Commercial Taxes Department, which was set aside by the Rajasthan Tax Board on 10/09/2007. The Tribunal observed that since the basis of the Central Excise proceedings was no longer valid due to the setting aside of the sales tax assessment, the Central Excise demand lacked merit. The Tribunal emphasized that the documents recovered from the ex-employees of the main appellant were not authenticated or corroborated.

3. Standard for Electricity Consumption:
The appellants argued that the Commercial Tax Department’s technical verification report on electricity consumption was not relevant to their case. They asserted that their electricity meters and power bills were neither manipulated nor incorrectly recorded. The Tribunal found that the findings regarding electricity consumption lacked supporting evidence and could not substantiate the allegation of unaccounted manufacture of excisable goods.

4. Production Capacity and Alleged Excess Production:
The appellants highlighted that the Department had determined their annual production capacity as 29,061 MT in December 1998, making it physically impossible to produce 60,000 MT as alleged. The Tribunal noted the absence of corroborative evidence for such allegations, emphasizing that the alleged unaccounted production was nearly three times the accounted production, involving significant logistics and financial transactions without any supporting evidence.

5. Lack of Corroborative Evidence for Unaccounted Goods:
The appellants pointed out that neither the Commercial Taxes Department nor the Central Excise Department identified any buyers for the unaccounted goods. The Tribunal agreed, noting the absence of evidence for the movement of raw materials, finished goods, receipt of sale proceeds, and identified buyers. The Tribunal found that the entire case was based on unsupported assertions and lacked legally sustainable evidence.

6. Evidence and Corroboration Regarding Suppliers of MS Ingots:
The appellants, who were manufacturers and suppliers of MS Ingots, argued that the records and statements relied upon by the Original Authority had no evidentiary value. They emphasized the lack of independent verification and evidence of unaccounted manufacture or clearance. The Tribunal found that the demands against these manufacturers were on even weaker grounds, as no investigation was conducted at their end. The Central Excise Department failed to corroborate the records recovered by the Commercial Taxes Department with independent supporting evidence.

Conclusion:
The Tribunal concluded that the impugned order suffered from various legal and factual infirmities and could not be upheld. The allegation of unaccounted manufacture and clearance required corroboration with sustainable evidence, which was lacking in this case. The Tribunal set aside the impugned order and allowed the appeals.

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