2017 (3) TMI 1211 - AT - Central Excise

Principles of natural justice - abrasive stones - demand of duty on the basis of loose kuchhi slips - Held that - the appellant has submitted a Chartered Accountant s certificate indicating the percentage of clearance of various types of abrasive stones. They have also submitted the average price prevalent in various time periods for the various types of abrasive stones. But we find that the adjudicating authority has not considered these submissions and in any case not discussed the same in the impugned order. He has also gone ahead and adopted the valuation of the entire abrasive stones as pertaining to one type and adopted the higher value of such abrasive stones. The appellants have also sought the cross-examination of Shri Mukesh Sahu as well as Shri Jitendra Hinger which was denied. To satisfy the principles of natural justice, we are of the view that the adjudicating authority should permit the cross-examination of these witnesses. The case needs to be remanded back to the original adjudicating authority for making good the deficiency of breach of natural justice - appeal allowed by way of remand.

Summary

Issues Involved:
1. Denial of cross-examination.
2. Discrepancy in physical stock verification.
3. Reliance on private records without independent corroboration.
4. Lack of investigation into unaccounted raw materials and recipients of clandestinely cleared goods.
5. Arbitrary valuation of goods.
6. Delay in issuing the show cause notice and limitation period.

Issue-wise Detailed Analysis:

1. Denial of Cross-Examination:
The appellant argued that the order was passed without observing the principles of natural justice as their request for cross-examination of Shri Mukesh Sahu and Shri Jitendra Hinger was denied. The Tribunal noted that to satisfy the principles of natural justice, the adjudicating authority should permit the cross-examination of these witnesses.

2. Discrepancy in Physical Stock Verification:
The physical verification of stock of both finished and raw materials tallied with the statutory records, indicating no discrepancy in the physical stock. Despite this, the Revenue's allegation of clandestine clearance was based on private records (62 kucchi slips and three outward dispatch registers) without any discrepancy in the physical stock.

3. Reliance on Private Records Without Independent Corroboration:
The entire demand was raised based on 62 kucchi slips and three outward registers, which were private records. The appellant contended that there was no independent corroboration of the details found in these private records. The Tribunal observed that the adjudicating authority did not discuss the appellant's contention that many despatches in the outward registers were actually clearances of empty corrugated boxes and plastic holders.

4. Lack of Investigation into Unaccounted Raw Materials and Recipients of Clandestinely Cleared Goods:
The appellant argued that the Revenue failed to investigate the purchase of unaccounted raw materials and consumption of such inputs. No verification was undertaken at the end of regular suppliers of raw material or transporters, nor was any investigation carried out at the ends of the alleged recipients of clandestinely cleared goods. The Tribunal noted that the adjudicating authority did not provide findings on the proportion of goods arising from the appellant’s factory in the total despatches found in the outward dispatch registers.

5. Arbitrary Valuation of Goods:
The demand was confirmed by arbitrarily adopting the highest value of the abrasive stones. The adjudicating authority did not consider the Chartered Accountant’s certificate indicating the selling price of various types of goods cleared by the assessee over the last 11 financial years. The Tribunal observed that the adjudicating authority adopted the valuation of the entire abrasive stones as of one type and used the higher value, which was argued to be arbitrary.

6. Delay in Issuing the Show Cause Notice and Limitation Period:
The appellant contended that the show cause notice was issued after a gap of 1529 days from the search, making it hit by limitation. The Tribunal did not explicitly address this issue in the judgment.

Conclusion:
The Tribunal set aside the impugned order and remanded the case for a de novo decision. The adjudicating authority was directed to consider the appellant's arguments, permit the cross-examination of witnesses, and provide detailed findings on the issues raised. The case was to be re-evaluated in light of the Tribunal's observations, ensuring adherence to the principles of natural justice.