2018 (2) TMI 360 - AT - Central Excise

Clandestine removal - excesses of raw material and finished goods - personal penalty u/r 26 of CER, 2002 on co-noticees - Held that - Revenue has accepted that 21 Co-noticees were innocent - the entire Show Cause Notice for demand of Central Excise duty amounting to ₹ 7,38,84,853/- was based on the statements and the said statements did not stand the scrutiny before the Original Authority - there was no evidence brought forward by Revenue in respect of procurement of raw-materials, engaging labourers, transportation of goods, buyers of the goods and realization of sale proceed in respect of goods alleged to have been clandestinely manufactured and cleared. Demand set aside - appeal dismissed - decided against Revenue.

Issues Involved:
1. Early hearing of the appeal.
2. Confiscation of excess finished goods and raw materials.
3. Demand for Central Excise duty on clandestinely cleared goods.
4. Imposition of penalty on the respondent and co-noticees.
5. Evidentiary value of statements recorded during the investigation.
6. Voluntary deposit of duty as an admission of guilt.
7. Cross-examination of witnesses.

Detailed Analysis:

1. Early Hearing of the Appeal:
The Revenue filed a Miscellaneous Application for early hearing, which was allowed as the respondent did not object. Consequently, the main appeal was heard on merits.

2. Confiscation of Excess Finished Goods and Raw Materials:
The respondents were engaged in the manufacture of Chewing Tobacco and were issued two Show Cause Notices (SCNs). The first SCN dated 25/08/2015 proposed the confiscation of excess finished goods valued at ?7,14,533/- and raw materials valued at ?1,36,83,980/- seized at the factory premises under Rule 25 of the Central Excise Rules, 2002. The Original Authority ordered the confiscation of unaccounted finished goods and imposed a redemption fine of ?1,00,000/- but dropped the proceedings for other proposals in the SCN.

3. Demand for Central Excise Duty on Clandestinely Cleared Goods:
The second SCN dated 03/01/2017 demanded duty amounting to ?7,38,84,583/- for goods cleared clandestinely. The Original Authority found that the evidence for allegations in the SCN was virtually non-existent and dropped the demand for Central Excise duty amounting to ?7,38,84,583/- and ?18,40,688/- from the first SCN. The Revenue's appeal argued that the Original Authority ignored significant evidence and relied solely on statements denied during cross-examination. However, the Tribunal upheld the Original Authority's decision, stating that the statements did not stand scrutiny and there was no corroborative evidence for clandestine clearances.

4. Imposition of Penalty on the Respondent and Co-Noticees:
The SCN proposed penalties under Rule 26 of the Central Excise Rules, 2002, on 21 co-noticees. The Original Authority dropped the penalty proceedings against these co-noticees, and the Revenue did not appeal against this part of the order, indicating acceptance of their innocence.

5. Evidentiary Value of Statements Recorded During Investigation:
The Revenue contended that the Original Authority erred by ignoring the evidentiary value of statements recorded during the investigation, which were not retracted and were voluntary. The Tribunal, however, found that the statements did not withstand cross-examination and lacked corroborative evidence, thus supporting the Original Authority's decision to discard them.

6. Voluntary Deposit of Duty as an Admission of Guilt:
The Revenue argued that the voluntary deposit of ?4 crores by the respondent during the investigation indicated an admission of guilt. The Tribunal, however, held that such deposits are treated as Revenue deposits and not as an admission of guilt, especially in the absence of adjudication proceedings confirming the duty liability.

7. Cross-Examination of Witnesses:
The Tribunal noted that the Original Authority allowed the cross-examination of witnesses, including one Shri Manoj, whose testimony suggested that the seized goods were fake and not manufactured by the respondent. The Revenue argued that the Original Authority erred in relying on this testimony without allowing the department to cross-examine Shri Manoj. The Tribunal, however, upheld the Original Authority's findings, emphasizing that the statements recorded during the investigation did not stand the scrutiny of cross-examination and lacked corroborative evidence.

Conclusion:
The Tribunal upheld the Original Authority's decision to drop the demands and penalties proposed in the SCNs, finding that the evidence presented by the Revenue was insufficient and the statements recorded during the investigation did not withstand cross-examination. The appeal filed by the Revenue was rejected, and the respondent was entitled to substantial relief as per law.

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