2017 (11) TMI 1505 - AT - Central Excise

Clandestine removal - allegations raised against the respondents were that they were removing Cone Yarn (dutiable) without paying duty under the guise of Hank Yarn (exempted) - Held that - the demand is mainly raised based upon the statements of the co-noticees, who are the Reeling Units. However, the department has not filed appeal against the co-noticees and has filed appeal against only on the main appellant - the allegation of the department that the appellant did not remove Cone Yarn to the Reeling Units but instead they have dispatched the dutiable Cone Yarn to yarn traders, without payment of duty is not supported by any documentary evidences, though the learned Authorised Representative has attempted to argue based upon the entries in the Gate Register - also, there is no evidence relied by department to prove the allegations in the show-cause notice - appeal dismissed - decided against revenue.

Summary

Issues involved: Allegations of clandestine clearance of goods, duty evasion, imposition of penalties, cross-examination of co-noticees, documentary evidence, demand of duty based on statements of co-noticees.

Analysis:

1. Allegations of Clandestine Clearance and Duty Evasion:
The case involved allegations against the respondents for removing dutiable Cone Yarn without paying duty under the guise of exempted Hank Yarn. Show-cause notices were issued, and penalties were imposed by the original authority. The Commissioner (Appeals) initially dismissed the appeals, leading to appeals before the Tribunal. The department argued that there was no payment for various charges related to yarn movement, and statements from involved parties supported the allegations.

2. Cross-Examination of Co-Noticees and Documentary Evidence:
The Tribunal remanded the matter to allow cross-examination of co-noticees. The co-noticees retracted their earlier statements during cross-examination, stating they received Cone Yarn for conversion into Hank Yarn, supported by AR3A Certificates countersigned by Excise Officers. The respondents presented documentary evidence like sales tax assessment orders and RG-1 extracts to prove their compliance and sales of Hank Yarn, refuting the allegations in the show-cause notice.

3. Demand of Duty Based on Statements vs. Documentary Evidence:
The department's demand of duty was primarily based on statements of co-noticees, which were retracted during cross-examination. The department failed to provide substantial documentary evidence to support the allegations. The Tribunal noted that the department did not appeal against the co-noticees and relied on Gate Register entries without examining the register's maintainer. The absence of concrete evidence led to the dismissal of the appeals.

4. Final Decision:
After reviewing the facts and evidence, the Tribunal found no grounds to interfere with the Commissioner (Appeals)'s decision to set aside the demand of duty and penalties. The appeals filed by the department were dismissed, emphasizing the lack of substantial evidence to support the allegations of duty evasion and clandestine clearance.

In conclusion, the judgment focused on the importance of documentary evidence, cross-examination of witnesses, and the burden of proof in cases of duty evasion. The dismissal of the appeals highlighted the necessity for concrete evidence to substantiate allegations in customs and excise matters.