2017 (10) TMI 654 - AT - Central Excise

Clandestine manufacture and removal - dutiable cotton cone yarn - opportunity to cross examine - Held that - the Tribunal made it very clear that sustenance or otherwise of the allegations and charges made against the appellant in the SCN will be dependent on the evidence drawn up in the cross examination of Shri P. Duraisamy. It is interesting to note that this final order, dated 30-08-2006 of CESTAT was not appealed against by the department, from which it can be inferred that the department did not have any grievance against these findings and directions of the Tribunal. The entire de novo proceedings will therefore have to be viewed through the lens of the Tribunal s earlier final order. The facts on record indicate that in the cross examination Shri P. Duraisamy has retracted the entire statements given by him. He has also categorically denied ever having been the Technical Director of the company. He has informed that he was only Technical Consultant which at the most, would make him a third party to the proceedings. Statements made by other persons have also been retracted either by way of retraction or in their cross-examination - the entire bed rock of the department s case against the appellant namely, the statement of Shri Duraisamy and the documents allegedly authored by him, have crumbled in the aftermath of the cross examination of the said person. The allegations and charges made against the appellant will not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegation of clandestine removal of dutiable goods without payment of excise duty.
2. Cross-examination of a crucial witness, Shri Duraisamy, and reliance on his statements and documents.
3. Retraction of statements made by Shri Duraisamy and other persons during cross-examination.
4. Reliance on recovered documents and records to support the charges against the appellant.

Analysis:

Issue 1: Allegation of clandestine removal of dutiable goods without payment of excise duty
The case involved M/s.Pullicar Mills Ltd., accused of clandestine removal of dutiable cotton cone yarn without payment of duty. The department alleged misuse of transportation procedures, fictitious production, misdeclaration of yarn count, and disguised removal of goods for sale. A show cause notice was issued proposing a demand of ?56,66,418 along with penalties. The adjudicating authority confirmed a demand of ?50,51,331 with penalties. The Tribunal remanded the case for de novo adjudication due to discrepancies in evidence.

Issue 2: Cross-examination of Shri Duraisamy and reliance on his statements
The Tribunal directed the adjudicating authority to allow cross-examination of Shri Duraisamy, a crucial witness whose statements and documents formed the basis of the allegations. In the de novo proceedings, Shri Duraisamy retracted his statements, denying his role as Technical Director and disassociating himself from the incriminating documents. The Tribunal found that the department's case heavily relied on Shri Duraisamy's statements, which were later discredited during cross-examination.

Issue 3: Retraction of statements made by Shri Duraisamy and other persons
Shri Duraisamy, along with other witnesses, retracted their statements during cross-examination. This retraction undermined the foundation of the department's case, as the key evidence provided by these individuals was disavowed. The Tribunal observed that the department's case against the appellant collapsed following the retraction of statements and documents authored by Shri Duraisamy.

Issue 4: Reliance on recovered documents and records
The department relied on recovered documents, including private notebooks and profit and loss accounts, to support the charges of clandestine removal against the appellant. However, the authenticity and relevance of these documents were questioned during the proceedings. The appellant contested the validity of the evidence, highlighting discrepancies in the investigation process and the lack of verification from external sources.

In conclusion, the Tribunal set aside the impugned order, noting that the allegations against the appellant could not be sustained after the retraction of crucial statements and documents. The case underscores the importance of thorough cross-examination and the need for reliable and verifiable evidence in establishing charges of clandestine activities in excise matters.