2018 (11) TMI 1141 - AT - Central Excise

Clandestine removal - Electric Motors and power driven pumps - clearance of parts without payment of duty - demand mainly based on the statements recorded - opportunity for cross-examine not provided - Held that - There are no documentary evidence put forward by department to establish the under-valuation of scrap and clearance of pats without payment of duty. It is very much clear that though the appellants requested for cross-examination of the said persons, the original authority or the Commissioner (Appeals) has not acceded to the request. When the department relies upon statements, the opportunity of cross-examination of such witnesses ought to be granted to the appellants - The denial of cross-examination tantamount to violation of natural justice. The demand has wholly been raised, on the basis of the statements recorded. In such cases, the denial of cross-examination is fatal to the proceedings. Clearance of motor pumps without payment of duty - Held that - The quantification has been made basing upon the statement of the Manager of the Authorised Service Centre. According to the appellants such service station was engaged only for a short period. The quantification of demand on the basis of the statements of such persons for a period prior to 1997 indeed cannot sustain - the department has failed to establish the allegations raised in the show-cause notice - demand cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Allegation of under-valuation of scrap cleared by the appellants.
2. Allegation of clearing parts of motor pumps without payment of duty.

Detailed Analysis:
Issue 1: Allegation of under-valuation of scrap cleared by the appellants.
The case involved the appellants, engaged in the manufacture of Electric Motors and power-driven pumps, who were accused of under-valuing scrap and clearing parts of Electric Motors without payment of duty. The officers of the Preventive Unit discovered certain discrepancies during a visit to the appellants' premises, leading to a demand notice of duty evasion amounting to ?8,42,869/- and ?2,05,077/- from the Motor and Pumps Division. The appellants contended that the demand was based solely on statements without corroborating evidence. They requested cross-examination of the involved individuals, which was denied by the authorities. The appellants argued that since the scrap was not a marketable commodity and arose during the manufacturing process, duty demand on scrap itself could not be justified. The Tribunal, after considering the arguments, found that the demand lacked documentary evidence to establish under-valuation and clearance of parts without payment of duty. Citing legal precedents, the Tribunal emphasized the importance of granting the opportunity for cross-examination when relying on statements, concluding that the denial of cross-examination amounted to a violation of natural justice. Consequently, the demand was deemed unsustainable, leading to the setting aside of the impugned order.

Issue 2: Allegation of clearing parts of motor pumps without payment of duty.
Regarding the allegation of clearing parts of motor pumps without payment of duty, the appellants challenged the quantification of demand based on statements from the Manager of the Authorized Service Centre. They argued that the service station was engaged for a limited period, making the quantification for a period before 1997 erroneous. The Tribunal concurred with the appellants, noting the lack of evidence beyond the statements to support the allegation. It was observed that the department failed to establish the allegations raised in the show-cause notice. Consequently, the demand was deemed unsustainable, leading to the setting aside of the impugned order. The appeal was allowed with consequential relief, if any, pronounced in open court on 09.10.2018.