2019 (5) TMI 1285 - AT - Central Excise

Clandestine removal - chewing Tobacco and packing - It appeared to revenue that said quantity of packed chewing tobacco had been clandestinely manufactured and was intended to be removed clandestinely - Cross-examinations denied - extended period of limitation. HELD THAT - The Original Adjudicating Authority did not allow the cross examination of any of the whiteness, whose statements were relied upon for issue of show cause notice. The Original Authority has relied upon statements recoded on 12.09.2014 which is date the search was conducted in the premises situated at 328 KA Churamanpur, Varanasi, premises belonging to Shri Srikant Chaurasia. Revenue could not make out a case bringing no evidences as required for establishment of clandestine clearance as held in the case of Arya Fiber Pvt. Ltd. 2013 (11) TMI 626 - CESTAT AHMEDABAD - Further, the Original Authority has refused to accept the invoices issued by M/s Anmol Packaging and M/s Ambey Engineering even when revenue could not produce any positive evidence about the procurement of said FFS machines in the month of December, 2013 and January, 2014. Further, revenue did not find a single pouch of the finished goods in the market as per available record. Further, Revenue did not establish that the electric connection required for four FFS Machines was available with Shri Srikant Chaurasia since January, 2014 and he had paid electricity bill required for manufacture of goods involving duty of around ₹ 9 crores. We therefore, come to a conclusion that the impugned order is not sustainable. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Legitimacy of the search and seizure operation.
2. Validity of the evidence and statements collected during the search.
3. Denial of cross-examination of witnesses.
4. Allegations of clandestine manufacture and clearance of unbranded chewing tobacco.
5. Imposition of penalties on various appellants.

Detailed Analysis:

1. Legitimacy of the Search and Seizure Operation:
The premises located at 328 Ka, Churamanpur, Varanasi, were searched by Officers of Central Excise on 12.09.2014. During the search, four electrically operated FFS machines were found, three of which were running. Various materials, including plain pouches of chewing tobacco, loose tobacco, and packing materials, were seized. The search was conducted based on the suspicion of clandestine manufacture and intended removal of goods without compliance with the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. The seized goods were valued at ?2,43,240/-. The search and seizure were documented through a panchnama dated 12.09.2014.

2. Validity of the Evidence and Statements Collected During the Search:
Statements were recorded from various individuals, including Shri Srikant Chaurasia, who initially admitted to the production and clearance of unbranded chewing tobacco without central excise registration. However, he later retracted his statement, claiming it was made under duress. The appellant provided documents to support the claim that the machines were installed just before the search. The original authority dismissed these documents as fabricated and relied heavily on the initial statements recorded on 12.09.2014.

3. Denial of Cross-Examination of Witnesses:
The original adjudicating authority denied the cross-examination of witnesses, citing that it would delay the proceedings. This denial was challenged, as cross-examination is crucial for ensuring the principles of natural justice. The Tribunal noted that the original authority relied on statements that were not subjected to cross-examination, rendering them inadmissible as evidence.

4. Allegations of Clandestine Manufacture and Clearance of Unbranded Chewing Tobacco:
The show cause notice alleged that Shri Srikant Chaurasia was engaged in clandestine manufacture and clearance of unbranded chewing tobacco using four FFS machines since December 2013 and January 2014. The appellant provided invoices and affidavits to show that the machines were purchased and installed in September 2014, just before the search. The Tribunal found that the revenue did not provide sufficient evidence to prove clandestine manufacture and clearance. The criteria for establishing clandestine removal, as laid out in the case of Arya Fibres Pvt. Ltd., were not met. There was no evidence of excess raw materials, unaccounted finished goods, sales to identified parties, or excessive electricity usage.

5. Imposition of Penalties on Various Appellants:
Penalties were imposed on Shri Srikant Chaurasia and other appellants, including M/s Naveen Tobacco Company, M/s Ambey Engineering, M/s Anmol Packaging, and M/s Saran Roadways Company. The Tribunal found that the penalties were based on insufficient evidence and the denial of cross-examination. The original authority's reliance on retracted statements and dismissal of supporting documents provided by the appellants were deemed unjustified.

Conclusion:
The Tribunal set aside the impugned order, allowing all the appeals. The appellants were entitled to consequential relief as per law, as the original adjudicating authority failed to establish clandestine manufacture and clearance with adequate evidence and denied the principles of natural justice by not allowing cross-examination of witnesses.

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