2018 (4) TMI 1021 - AT - Central Excise

Clandestine manufacture and removal - it was alleged that appellant were clandestinely receiving texturized yarn from M/s DPPL and after dying the same and sent it back to M/s DPPL Silvassa - allegation based on record of the Godown Keeper of M/S Purohit Clearing Agency - whether all goods cleared are recorded in register of Purohit Clearing Agency and are dyed yarn? - Held that - unless Revenue is able to establish that the entire yarn listed in Register 28and 31 is dyed yarn no case can be made against the appellant. In this respect the sole evidence relied upon by Revenue is statement of Birbal Singh. Thus it is imperative that no reliance on the said statement can be placed as no cross-examination has been granted. Revenue has alleged that appellant have manufactured about 8.11 lakhs kgs. of dyed yarn - In the absence of cross-examination of the officer it would be incorrect to rely on the said report to counter the claim of the appellant that their production capacity is much lower than the alleged production. It was also alleged that All these dyed yarn is manufactured by M/S DTPL Tarapur and supplied to M/s. DPPL Silvassa - Held that - there is barely any evidence to support the allegation that M/s DPPL Silvassa had supplied this quantity of yarn to M/s DPPL Tarapur and received back the dyed yarn from DTPL Tarapur - Revenue has relied upon the statement of Security Personnel who had joined barely 8 days before his statement was recorded. Revenue is seeking to rely on his statement for period long before he had joined the organization. In these circumstances the statement of the security supervisor cannot be relied. Revenue has failed to substantiate the allegations on numerous counts - Demand has to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Allegation of clandestine manufacture and clearance of dyed yarn by M/S Detco Textiles Pvt Ltd (DTPL).
2. Reliability of evidence and statements used by the Revenue.
3. Manufacturing capacity of DTPL.
4. Denial of cross-examination requests by the appellants.
5. Alleged transportation discrepancies between DTPL and DPPL.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Manufacture and Clearance of Dyed Yarn by M/S Detco Textiles Pvt Ltd (DTPL):
The primary allegation was that DTPL clandestinely received texturized yarn from DPPL, dyed it, and sent it back to DPPL. This was purportedly done without proper documentation and payment of duties. The evidence included various registers and statements from individuals involved in the process. The show cause notice was based on documents recovered during searches at DTPL and Purohit Clearing Agency.

2. Reliability of Evidence and Statements Used by the Revenue:
The Revenue's case heavily relied on the statements of Birbal Singh, the Godown Keeper at Purohit Clearing Agency, and other personnel. Birbal Singh's statement indicated that all yarn entries in Register Nos. 28 and 31 were dyed yarn. However, the appellants argued that only entries marked with ‘D’ were dyed yarn. The Tribunal noted that the cross-examination of Birbal Singh and other officials involved in capacity determination was denied, which compromised the reliability of the statements.

3. Manufacturing Capacity of DTPL:
The appellants contended that it was impossible to manufacture the alleged quantity of 8.11 lakh kgs of dyed yarn in their factory. They referred to studies conducted by the Revenue, which estimated a maximum capacity of 32.5 tonnes per month. The Tribunal found that the calculations in these reports were based on several presumptions and lacked cross-examination, making them unreliable. The Tribunal highlighted that the alleged production would require the machines to operate at 125% capacity continuously for three years, which was deemed unrealistic.

4. Denial of Cross-Examination Requests by the Appellants:
The appellants requested cross-examination of Birbal Singh and the officials involved in the capacity studies, which was denied. The Tribunal emphasized that without cross-examination, the statements could not be fully relied upon. This denial weakened the Revenue's case significantly, as the appellants could not challenge the evidence effectively.

5. Alleged Transportation Discrepancies Between DTPL and DPPL:
The Revenue alleged that the number of vehicle trips between DTPL and DPPL was excessive, indicating clandestine movement of goods. However, the Tribunal noted that there was no concrete evidence of transportation of dyed yarn from DTPL to DPPL. The statements of the security personnel, who had joined shortly before the searches, were not considered reliable for the period in question.

Conclusion:
The Tribunal concluded that the Revenue failed to substantiate the allegations on multiple counts. The evidence presented was deemed insufficient and unreliable, especially in the absence of cross-examination. Consequently, the appeals were allowed, and the impugned order was not upheld.