2018 (4) TMI 763 - AT - Central Excise

Clandestine manufacture and removal - Copper Wire - allegation made on the basis of machines found working in the units, the dairies recovered as well as the statement given by Rajesh Kumar Gupta, the Proprietor, and of two workers - Held that - Even though the Rajesh Gupta in his statement decoded and explained the entries in the two note books and admitted to the clandestine clearances, he retracted his inculpatory statement the very next day - workers also during their cross examination before the Adjudicating Authority, have retracted their original statements and submitted that these statements were recorded under duress - the main evidence relied by the Department in the form of documentary as well as oral, are in jeopardy. The recovery of cash as well as the documentary evidence in the form of note books was made from the residence of Rajesh Kumar Gupta, Proprietor but the authenticity of the panchnama proceedings have been seriously questioned by the appellant - During the cross examination of the second panch witness, Shri L. N. Gupta, he submitted that he was not present at the residence of the proprietor during the period 7 am to 16 30 Hrs when the proceedings were already over and he was asked to sign the panchnama. These facts emerged only during his cross examination - In view of this the panchnama proceedings leading to recovery of cash and documentary evidence loses its authenticity and evidence recovered through such proceedings cannot be relied upon against the appellant. The charge of clandestine clearance needs to be established on the basis of credible and tangible evidence - In the present case the panchnama of the search proceedings at the residence stands vitiated - The statement recorded from the two workers as well as the proprietor which were originally inculpatory in nature stand retracted during various stages of the proceedings - also, the two suppliers of raw materials who had admitted to supply of wire rods to the appellant were manufacturers of wire rods which stands explained by the appellant as procured for used in their trading activity. The allegations of clandestine manufacture and clearance have not been established satisfactorily by Revenue - appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine manufacture and clearance of copper wire without payment of excise duty.

Analysis:
1. The appeal was against an Order-in-Original alleging clandestine manufacture and clearance of copper wire without excise duty payment. Search operations revealed wire drawing activity, seized goods, incriminating evidence, and cash. Statements from the proprietor and workers initially incriminated the appellant.

2. Appellant's Arguments:
- Retraction of inculpatory statements by the proprietor and workers undermined evidentiary value.
- Purchase of wire drawing machines after search contradicted clandestine manufacturing allegations.
- Machinery purchase evidence supported by invoices and affidavit.
- Requested setting aside of Central Excise duty demand.

3. Revenue's Defense:
- Upheld the impugned order based on incriminating statements and evidence.
- Dismissed retractions as baseless and highlighted electricity consumption as proof.
- Cited statements from suppliers confirming raw material sales to the appellant.
- Argued for upholding the demand.

4. Rejoinder:
- Clarified raw material suppliers were for trading purposes, not manufacturing.
- Mentioned the release of cash based on ownership claims by another entity.

5. Tribunal's Decision:
- Found main evidence questionable due to retractions and inconsistencies in statements.
- Accepted appellant's explanation of machinery purchase timeline and rejected the plea of alibi.
- Questioned the authenticity of panchnama proceedings and evidence recovery.
- Emphasized the need for credible evidence to establish clandestine clearance.
- Concluded allegations were not satisfactorily proven by Revenue, setting aside the impugned order and allowing the appeal.