2017 (12) TMI 766 - AT - Central Excise

Clandestine removal - it was alleged in the show-cause notice that total quantity of 3440.500 MT ingots was clandestinely cleared - Held that - It is settled position of law that quantification of alleged clandestine clearance only on the basis of theoretical estimation of production cannot be sustained in the case of R A Castings Pvt. Ltd. vs. Commissioner 2015 (7) TMI 29 - CESTAT NEW DELHI . The Tribunal observed that duty demand made on basis of theoretical calculations of production is not sustainable. The main evidence on the basis of which the adjudicating authority has upheld the duty demand of ₹ 7,52,843/- is the private documents in the form of scribbling pads recovered from the factory premises of the assessee. Such scribbling pads are said to contain the details of the goods removed without payment of duty by the assessee - The invoice number, quantities and date pertaining to invoice No.181 tallied in respect of the entries found in scribbling pads, gate register as well as regenerated invoices. This clearly establishes the charge of removal of ingots without payment of duty and confirms the practice of multiple transportation under the same invoice. Cross-examination of witnesses - Held that - We find that only one of the statements recorded from Shri Jawahar has been retracted subsequent to the date of recording. However, Shri Jawahar has confirmed the facts in his subsequent statements nullifying the retraction. In the absence of retraction by any of the other witnesses, the denial of cross-examination does not vitiate the proceedings. The adjudicating authority has confirmed the demand of duty of about Rs. ₹ 7,52,843/- on the basis of documents recovered from such proceedings and whose veracity has been proved from the corroborative evidences like regenerated invoice and gate register evidencing the clandestine removal of the ingots by the assessee - demand upheld. Penalty u/r 26 of CER, 2002 on Shri Paramasivam, Managing Director - Held that - Shri Paramasivam, Managing Director has admitted the clearance of excisable goods without payment of duty as is evident from his letter dated 29.7.2003 admitting the duty liability. He has concerned himself with the production and removal of excisable goods which were liable to confiscation - penalty upheld. Appeal dismissed - decided against appellant.

Issues Involved:
1. Cross-examination of witnesses under Section 9D of the Central Excise Act, 1944.
2. Validity of duty demand based on theoretical estimation of production.
3. Confirmation of duty demand based on private documents and corroborative evidence.
4. Imposition of penalty on the Managing Director under Rule 26 of the Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Cross-examination of witnesses under Section 9D of the Central Excise Act, 1944:
The assessee argued that the adjudicating authority did not allow cross-examination of 10 witnesses whose statements were used against them, except for one witness, Mr. Sasidharan Pillai. The assessee contended that this was a violation of Section 9D of the Central Excise Act, 1944, which mandates that witnesses must be available for cross-examination before their statements can be used in quasi-judicial proceedings. The adjudicating authority justified the non-production of the other 9 witnesses, stating that they were employees of the company and under the control of the assessee, making cross-examination redundant. The tribunal found this reasoning reasonable, especially since only one statement was retracted, which was later confirmed in subsequent statements.

2. Validity of duty demand based on theoretical estimation of production:
The department estimated the clandestine clearance of ingots based on power consumption records, calculating that the assessee could produce 780 MT of ingots per month. This estimation was used to project a total clandestine clearance of 30,420 MT over 39 months, leading to a demand for Central Excise duty amounting to ?56,79,181/-. The adjudicating authority did not uphold this demand, as the power consumption records were found unreliable due to improper recording by the electricity meter. The tribunal supported this decision, citing the case of R A Castings Pvt. Ltd., which established that duty demands based solely on theoretical production estimates are unsustainable.

3. Confirmation of duty demand based on private documents and corroborative evidence:
The adjudicating authority confirmed a duty demand of ?7,52,843/- based on private documents like scribbling pads, which detailed goods removed without payment of duty. These documents were corroborated by other evidence, including regenerated invoices from a seized computer and gate register entries. The tribunal found that the corroborative evidence, such as multiple invoices with the same serial number and entries in the gate register, confirmed the clandestine removal of ingots. The tribunal upheld the duty demand and penalties imposed on the assessee, rejecting the appeal.

4. Imposition of penalty on the Managing Director under Rule 26 of the Central Excise Rules, 2002:
The Managing Director, Shri Paramasivam, was penalized ?50,000/- for his involvement in the clearance of excisable goods without payment of duty. He admitted the duty liability in his letter dated 29.7.2003 and was found to have concerned himself with the production and removal of excisable goods liable to confiscation. The tribunal upheld the penalty, finding no reason to interfere with the adjudicating authority's decision.

Conclusion:
The tribunal sustained the impugned order, rejecting all appeals filed by the assessee, the Managing Director, and the department. The tribunal found no reason to interfere with the adjudicating authority's decisions, which were based on corroborative evidence and reasonable interpretations of the law. The order was pronounced in open court on 14.12.2017.

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