2017 (8) TMI 832 - AT - Central Excise

Clandestine manufacture and removal - It appeared that the appellant had not accounted their production of cotton yarn on cones, that the suppressed production was removed without payment of duty to the yarn dealers in R.S.Puram, using the invoices of SGT and SVT - Held that - Discernably, there is considerable, if not predominant, reliance on the said statements while issuing the SCN. It is also seen that they are hardly any relied upon documents that have been recovered/obtained to corroborate the documents given in those statements. This being so, the Tribunal Final order of 22.09.2004 assumes significance. The Tribunal in that order with regard to duty demand of ₹ 23,26,451/- from Shri V. Madhu, proprietor of the appellant found that the only evidence gathered by Revenue is what is contained in the statements of the appellants as well as S/Shri P. Dinesh, Vijayakumar Parikh and Siddharth Parikh, who are second stage dealers and allegedly received consignments from KGT during 1998-99. The Tribunal also noted that the adjudicating authority found clandestine removal of goods merely on the basis of uncorroborated statements. The adjudicating authority has proceeded with a prejudged frame of mind in respect of guilt of the appellant. The adjudicating authority has also not taken into cognizance or appreciated the raison-detre of the Tribunal in their earlier Final Order dated 22.09.2004. In a matter like this, where the entire basis of the allegations against an assessee is only on statements of various persons recorded by the departmental officers, all efforts have to be made by the adjudicating authority to ensure that the veracity of such statements is got tested and in case they have been retracted either by the individual concerned through a letter or in cross examination, absolute reliance on such statements cannot then continue to be made. This is all the more important when the inculpatory admissions initially made at the time of recording statements are not backed up by sufficient documentary or other corroboratory evidence, as it is the case herein. The confirmation of demand of differential duty and other legal consequences that have been confirmed in the impugned order predominantly on the basis of uncorroborated statements, but which have been subsequently retracted, will render the impugned order unsustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of duty and penalties based on clandestine removal of goods without proper documentation.
2. Reliance on statements of witnesses for duty demand confirmation.
3. Imposition of penalties under Rule 173Q and Section 11AC.
4. Consideration of cross examination results in determining the credibility of witnesses' statements.

Analysis:
1. The case involved a demand of duty and penalties due to alleged clandestine removal of goods without proper documentation. The appellant was accused of selling cotton yarn on cones without accounting for production or paying duty, using invoices of other entities. A Show Cause Notice was issued proposing significant duty demands, confiscation of goods, and penalties under various provisions of law.

2. The Tribunal initially set aside a portion of the demands and penalties but remanded the case for fresh consideration regarding a specific duty demand. The subsequent adjudication confirmed the demand based on witness statements, leading to the imposition of penalties under Rule 173Q and Section 11AC. The appellant challenged this decision, arguing that the reliance on witness statements without proper corroboration was unjust.

3. The appellant contended that the penalties imposed were unwarranted, especially given the lack of substantial evidence supporting the duty demands. The adjudicating authority's decision was criticized for not considering the credibility of witness statements during cross examination, leading to an unjustified imposition of penalties under different provisions of law.

4. The Tribunal analyzed the case, emphasizing the importance of corroborative evidence and the credibility of witness statements. It noted discrepancies in the adjudicating authority's approach, highlighting the rejection of witness statements during cross examination without proper justification. The Tribunal concluded that the reliance on uncorroborated statements, later retracted by witnesses, rendered the adjudicating authority's decision unsustainable. As a result, the impugned order was set aside entirely, and the appeal was allowed with consequential relief, if any, as per law.