2018 (6) TMI 122 - AT - Central Excise

Clandestine Removal - undervalutaion of goods - cross-examination of witnesses not done - contention of the appellant is that the appellant has done trading activity and to that effect they have produced purchase invoices and sale invoices with regard to the trading activity, the same has not examined by the adjudicating authority properly and in haste concluded that the appellant has undervalued the goods. Held that - In the remand proceedings, the adjudicating authority was directed to cross examine the witnesses whose statements have been relied upon. Despite the directions, the adjudicating authority chose not to give cross examination of the witnesses on the ground that they have never retracted their statements recorded during the course of investigation. The charging of clandestine removal is not sustainable, in the absence of any corroborative evidence except the statements. Moreover, the statements of the witnesses are to be tested in terms of Section 90 of the Central Excise Act, 1944 which specifies that first examination-in- chief is required to be conducted all the witnesses and thereafter the adjudicating authority has to confirm with the statements recorded is correct and over cross examination of the same to the assessee - in the absence of any cross-examination or corroborative evidence, in support of the statement relied upon, the charge of clandestine removal of goods is not sustainable against the appellant. Under-valuation of goods - Held that - The demand on account of under valuation of goods to the tune of ₹ 1,03,21,612/- is not sustainable on the basis of merely computer printout recovered during the course of investigation without any corroborative evidence thereof - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Under valuation of goods.
2. Clandestine removal of goods.
3. Imposition of penalties based on the above charges.

Issue-wise Detailed Analysis:

1. Under Valuation of Goods:
The appellants were charged with under valuation of goods, leading to a demand for duty amounting to ?1,03,21,612/-. The investigation revealed discrepancies between dispatch advices and regular invoices, suggesting mis-declaration of value. However, the adjudicating authority failed to compare the audited records of the appellants with the loose papers recovered during the investigation. The appellant argued that the amount in question represented trading activities, supported by purchase and sale invoices, which were not properly examined by the adjudicating authority. The Tribunal found that the charge of under valuation was not sustainable merely based on computer printouts without corroborative evidence, especially when the appellant provided evidence of trading activities.

2. Clandestine Removal of Goods:
The appellants were also accused of clandestine removal of goods, resulting in a duty demand of ?2,61,95,174/-. The charge was based on printouts from a seized computer listing 133 parties allegedly receiving goods without payment of duty. The appellant contended that there was no evidence of raw material purchase, movement of finished goods, or payment of consideration by these parties. The Tribunal noted that the adjudicating authority did not allow cross-examination of witnesses whose statements were relied upon, violating principles of natural justice. The Tribunal emphasized that the charge of clandestine removal must be supported by corroborative evidence, such as statements of buyers, transporters, or proof of payment, which were absent in this case. The reliance on statements without cross-examination or additional evidence rendered the charge unsustainable.

3. Imposition of Penalties:
Penalties were imposed on the appellants based on the charges of under valuation and clandestine removal. Given that both charges were found unsustainable due to lack of corroborative evidence and procedural lapses, the penalties imposed were also deemed unjustified. The Tribunal highlighted that the adjudicating authority did not comply with the directions to ensure a fair comparison of records and proper examination of witnesses, further invalidating the basis for penalties.

Conclusion:
The Tribunal set aside the impugned order, finding no merit in the charges of under valuation and clandestine removal of goods. The appeals filed by the appellants were allowed with consequential relief, if any, underscoring the necessity of corroborative evidence and adherence to principles of natural justice in adjudication processes.