2018 (8) TMI 1655 - AT - Central Excise

Clandestine removal - clearance of cheese cotton yarn in the guise of hank yarn - the main documentary evidence is the brokers commission file alleged to have been recovered from the factory premises - non-production of persons for cross-examination - Held that - The said document cannot be relied and does not support the allegations raised in the show cause notice - Without producing the persons for cross-examination, the adjudicating authority has relied on the statements of these persons. The law is settled in this regard that as per section 9B of Central Excise Act, when the appellant has requested for examination/cross-examination, the same has to be considered and the statement without examination cannot be relied. Though it is alleged that appellant manufactured and cleared 156700 Kgs. of yarn in the form of cheese / cone without accounting and removed without payment of duty, no evidence is adduced to establish the purchase of cotton, payment made to suppliers for cotton, transportation, payment of freight, consumption of electricity etc. - when it is alleged that appellant cleared without accounting, the department has equal responsibility to adduce evidence as to the procurement of the raw materials as well as evidence for clandestine manufacture and clearance which is not brought to light, from the records of the case. The statement of Shri Elango, which was recorded on 16.11.1998 has been heavily relied by the department. It is seen that he has retracted his statement immediately on 24.12.1998 by filing a sworn affidavit. The department has not been able to establish the clandestine clearance or clearance of cotton yarn in the guise of hank yarn - demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged clandestine clearance of cotton yarn by the appellant.
2. Reliability of documentary evidence - broker commission file.
3. Validity of statements recorded from various individuals.
4. Lack of concrete evidence to establish clandestine removal of goods.
5. Adherence to procedural requirements in examination/cross-examination of witnesses.

Detailed Analysis:
1. The case involved allegations of clandestine clearance of cotton yarn by the appellant, evading payment of central excise duty. The officers found the appellant engaged in manufacturing OE cotton yarn and issued a show cause notice based on a broker commission file and statements recorded. The original authority confirmed a demand along with penalties. The appellant challenged this before the Tribunal, citing lack of concrete evidence to substantiate the allegations.

2. The main documentary evidence, the broker commission file, was alleged to contain details of payments to a broker, but the appellant disowned the document. The cross-examination of the broker revealed discrepancies, casting doubt on the reliability of the file. Other evidence, such as statements from the Managing Director and traders, was also contested for lack of corroboration and procedural irregularities.

3. The statements recorded from various individuals were crucial to the case. However, inconsistencies emerged during cross-examination, undermining their credibility. The reliance on these statements without proper verification or corroboration raised doubts about their evidentiary value.

4. The department failed to provide concrete evidence establishing clandestine removal of goods by the appellant. Lack of proof regarding procurement of raw materials, payment to suppliers, transportation, and other essential steps in the alleged process weakened the case against the appellant. The investigation appeared to be based on assumptions rather than solid evidence.

5. Procedural lapses, such as not producing witnesses for cross-examination despite requests, further raised concerns about the fairness of the adjudication process. The failure to adhere to procedural requirements, including examining witnesses as requested by the appellant, highlighted deficiencies in the investigation and adjudication process.

In conclusion, the Tribunal found that the department had not substantiated the allegations of clandestine clearance of cotton yarn by the appellant. Due to lack of concrete evidence, procedural lapses, and inconsistencies in the recorded statements, the demand was set aside, and the appeal was allowed in favor of the appellant.