2019 (4) TMI 996 - AT - Central Excise

Clandestine manufacture and removal - the entire case of the department is based on the documents recovered i.e. handwritten pencil ledgers at the premises of M/s Deepak Industries - corroborative evidences or not? - witnesses for cross- examination not produced by Department - HELD THAT - The appellant requested for cross-examination of these witnesses, however, we find that the department was not able to produce these witnesses, as evident from the impugned order passed by the learned Commissioner. We find that it is well settled law that if the department is not able to produce their witness for cross- examination, then the said statements of those witnesses cannot be relied upon as held by Hon ble High Court of Madras in the case of Karan Traders Vs Joint Commissioner of C. Ex, Salem 2016 (7) TMI 870 - MADRAS HIGH COURT . The statements of Sh. Ravindra Singh, Proprietor of M/s Deepak Industries and Sh. Ajay Kumar Singh, Service-Senior Assistant of M/s Prakash Industries Ltd, cannot be relied upon and has to be eschewed from evidence - the department has also relied upon the documents recovered from the premises of the appellant, however, we find that there is neither any signature of the appellant or panchas or even officers of DGCEI, and the said documents have never been confronted to the proprietor of the appellant. This clearly raises a suspicion on the genuineness of the said documents, as rightly argued by the learned Counsel for the appellant, especially, when there is no other cogent and positive evidence adduced by the department in the nature of purchase of raw material, use of electricity, sale of final products, payment, realization of sale proceeds, mode and flow back of funds. There is no iota of evidence on records as per law - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Alleged suppression of production and clearance without payment of duty.
2. Reliability of evidence based on third-party records.
3. Admissibility and reliability of statements recorded under Section 14 of the Central Excise Act, 1944.
4. Application of SSI Exemption Notification No. 8/2003-CE.
5. Determination of assessable value and applicability of cum-duty benefit.
6. Entitlement to CENVAT credit.
7. Procedural lapses in job work clearances.

Detailed Analysis:

1. Alleged Suppression of Production and Clearance Without Payment of Duty:
The appellant was accused of suppressing production and clearance of Binding Wire without paying duty, based on records recovered from M/s Deepak Industries and M/s Prakash Industries Ltd. The department issued a show cause notice proposing duty demand for the period July 2010 to February 2014, which was confirmed by the Principal Commissioner.

2. Reliability of Evidence Based on Third-Party Records:
The appellant argued that the demand was confirmed solely on the basis of third-party records without corroborative evidence. The Tribunal noted that the department did not investigate critical aspects such as excess production details, purchase of excess raw materials, dispatch particulars, realization of sale proceeds, and excess power consumption. The Tribunal held that the records from M/s Deepak Industries were not reliable as they were handwritten, unsigned, and some entries were illegible.

3. Admissibility and Reliability of Statements Recorded Under Section 14 of the Central Excise Act, 1944:
The appellant contended that the statements of Sh. Ravindra Singh and Sh. Ajay Kumar Singh could not be relied upon as they were not produced for cross-examination, and Sh. Ravindra Singh had retracted his statement. The Tribunal agreed, citing precedents that statements not subjected to cross-examination lose their evidentiary value.

4. Application of SSI Exemption Notification No. 8/2003-CE:
The appellant claimed the benefit of SSI Exemption Notification No. 8/2003-CE, arguing that their clearances were within the SSI limit and procedural lapses should not deny substantive benefits. The Tribunal found merit in this argument, noting that the appellant's production capacity was much less than the alleged quantity.

5. Determination of Assessable Value and Applicability of Cum-Duty Benefit:
The appellant challenged the assessable value determined by the department, which was based on the value of identical goods sold by a third party. The Tribunal held that the department did not provide any documents to justify this valuation and that the appellant was entitled to the benefit of cum-duty.

6. Entitlement to CENVAT Credit:
The appellant argued that if they were liable to pay duty, they should be entitled to CENVAT credit. The Tribunal acknowledged this entitlement, noting that the Commissioner had allowed CENVAT credit in a similar case.

7. Procedural Lapses in Job Work Clearances:
The appellant contended that goods manufactured on a job work basis should be excluded from the annual value of clearances under the SSI Notification. The Tribunal agreed, noting that procedural lapses should not deny substantive benefits.

Conclusion:
The Tribunal set aside the impugned order, holding that the demand, interest, and penalty were not sustainable. The appeals were allowed with consequential reliefs, if any. The Tribunal emphasized the need for corroborative evidence and adherence to legal principles in confirming duty demands.