2018 (10) TMI 693 - AT - Central Excise

SSI Exemption - under reporting and suppressing their production and clearance - fictitious firm - duplicate invoices - it appeared that under the same invoice numbers goods had been sold to two different sets of buyers, the other set of sale transactions being unaccounted - the goods sold also had not been accounted for in their books of accounts. Held that - In absence of Enquiry /cross-verification from all the customers who had made payments in the four Bank Accounts, it cannot be presumed that payments made by them were in respect of goods manufactured and cleared by the appellant - Without taking into account and giving any finding on the said invoices recovered during investigation and other material, the finding by the Commissioner regarding the non-existence of M/s Cosmoline Electricals, is without any basis and is accordingly set aside. Whether the appellant had necessary infrastructure to manufacture aluminium wires? - Held that - The appellant had relied upon the statements of Krishna Singh Rathore, Rajesh Batra to show that they did not possess the necessary machinery and infrastructure to manufacture aluminium products. The department has failed to contradict the said stand of the appellant with any positive evidence to show that the appellant indeed had the infrastructure to manufacture aluminium wires - the finding in the impugned order in this regard is untenable. Cross-examination of statement - Held that - No reliance can also be placed solely on the uncorroborated statement dated 22.05.1998 of Sh. Brajesh Batra, especially in view of his subsequent statement and cross-examination, to corroborate that the payments received in the Bank Accounts were concerning the goods manufactured by the appellant - Further, Sh. Vinod Kumar and Sh. Shrinath in their statements and cross examination have merely stated that the four Bank Accounts were opened at the behest of Sh. Brajesh Batra and were controlled by him, and that they had no knowledge regarding the source and purpose of the said cheques. Nothing incriminating comes from the said statements. The department has failed to prove the charge of clandestine removal with any credible evidence. Neither was there any seizure of unaccounted raw material/ finished goods from the appellant or any of its buyers, nor has the department gathered any other clinching evidence in the form of clandestine purchase of raw material, excess production details, details of unaccounted dispatch by regular transporters, excess power consumption, etc. - duty demand with penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand of duty based on statements of buyers and cross-examination.
2. Existence and role of secret bank accounts.
3. Alleged fictitious nature of M/s Cosmoline Electricals.
4. Capability of manufacturing aluminum cables.
5. Evidence supporting clandestine removal and duty evasion.

Issue-wise Analysis:

1. Demand of Duty Based on Statements of Buyers and Cross-Examination:
The initial duty demand of ?23,20,278/- was based on statements from 17 buyers who claimed to have purchased Batra Henlay brand wires and cables from M/s Batra Enterprises. The Tribunal emphasized the necessity of cross-examination of these buyers, in accordance with Section 9D of the Central Excise Act, 1994. During the remand, cross-examination was conducted, but only one buyer confirmed their earlier statement, while others either refrained from appearing or claimed memory lapse. Consequently, the Commissioner determined that the statements lacked evidentiary value and dropped the demand, as there was no corroborative evidence to substantiate the claims.

2. Existence and Role of Secret Bank Accounts:
The demand of ?66,04,307/- was primarily based on transactions in four secret bank accounts, allegedly used for depositing sale proceeds of clandestinely manufactured goods. These accounts were opened and operated by Shri Vinod Kumar, an employee of Grandlay Cinema, under instructions from Shri Brajesh Batra. The Tribunal noted that without cross-verification from all customers who made payments into these accounts, it could not be presumed that the deposits were for goods manufactured by M/s Batra Henlay Cables. The Commissioner’s reliance on these transactions without corroborative evidence was deemed insufficient.

3. Alleged Fictitious Nature of M/s Cosmoline Electricals:
The Commissioner concluded that M/s Cosmoline Electricals was a fictitious entity based on a letter from the Deputy Commissioner of Commercial Tax. However, the Tribunal found this conclusion flawed as it did not consider the existence of the firm during the relevant period (1994-1998) and overlooked invoices and sales tax numbers indicating its legitimacy. The Tribunal set aside the Commissioner’s finding on this matter.

4. Capability of Manufacturing Aluminum Cables:
The Tribunal highlighted the importance of determining whether M/s Batra Henlay Cables had the infrastructure to manufacture aluminum cables. Statements from company employees indicated that the firm lacked the necessary machinery. The department failed to provide evidence to the contrary, leading the Tribunal to reject the Commissioner’s finding that the firm manufactured aluminum cables.

5. Evidence Supporting Clandestine Removal and Duty Evasion:
The Tribunal found that the department did not produce credible evidence to support the charge of clandestine removal. There was no seizure of unaccounted raw materials or finished goods, no evidence of excess production, or unaccounted dispatch by regular transporters. The Tribunal noted the absence of crucial evidence such as excess power consumption details. Consequently, the Tribunal set aside the duty demand and penalties against M/s Batra Henlay Cables and Shri Brajesh Batra.

Conclusion:
The Tribunal allowed the appeals, setting aside the duty demands and penalties, and provided consequential relief to the appellants. The judgment emphasized the necessity of corroborative evidence and proper cross-examination to substantiate claims of duty evasion and clandestine removal.