2019 (7) TMI 565 - AT - Central Excise

Clandestine removal - grey fabrics - Grey Fabrics received for Job Work was found to be short - 75114 L. Mtrs of Finished MMF was found to be entered in job cards but not in lot register - HELD THAT - There is no co-relation of the said names with the lot register. The show cause notice has relied upon statement of Shri Gulshan Bhatia wherein he stated that the goods were cleared without payment of duty. However subsequently he retracted his statement - when the statement of Shri Gulshan Bhatia was retracted as having been obtained under pressure the same cannot be relied upon. Even otherwise in absence of cross examination of witnesses, their statements could not have been relied upon - in absence of cross examination of witnesses, no demand can be made against on the basis of statements. Demand of ₹ 2,43,369/- has been made on the ground that a quantity of 75114 L. Mtrs of Finished MMF valued at ₹ 20,28,078/- mentioned in job cards was not found in lot register and same has been cleared illicitly in open market - HELD THAT - Only on the basis of entries mentioned in job cards which do not match with the lot register, it cannot be said that the said goods shown in the job cards were removed without payment of duty. There is no evidence on record to show that such goods were removed in open market. Reliance has been placed upon the statement of Shri Gulshan Bhatia, which stands retracted. Except recording some statements, no evidence is appearing that the goods were disposed of in the market or if the goods belonging to the merchant manufacturers, when the goods were transported to them and what were the evidences for disposal of such goods. Thus, merely on the basis of statements, a demand cannot be made - If some lot numbers are not found in lot register, the same cannot be inferred to have been removed clandestinely - demand set aside. Demand of ₹ 55,09,868/- made on the basis of private register wherein the fabrics was found to have been entered without lot number - HELD THAT - The appellant has pleaded that the lot numbers of main one or two parties was shown therein, though it may contain more than two lot numbers. We find that no statement of the Printing master was recorded to ascertain the facts regarding the entries made in the private register. It is coupled with the fact that no corresponding clearances of such register were found. In such case, the private register cannot be made basis for demanding duty from the appellant unit on the ground that it contained details of goods removed without payment of duty - demand set aside. Demand of ₹ 2,43, 369/-has been made against the appellant on the ground that it pertains to the quantity of 65733L.mtrs. of grey fabrics has been found from private register as substitution against the lot numbers found in private register were cleared and processed fabrics of quantity 59159.75 L.Mtrs - HELD THAT - When the person maintaining such private register has not been interrogated nor his statement has been recorded, in such case, no allegation can be made on the basis of Private Register and no duty can be demanded. The impugned order demanding duty and penalty is not sustainable and is accordingly set aside - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Demand of duty due to alleged shortage of grey fabrics.
2. Demand of duty based on discrepancies in job cards.
3. Demand of duty based on entries in a private register.
4. Demand of duty based on substitution of grey fabrics in the private register.
5. Imposition of penalties on the appellant unit and its director.

Issue-Wise Detailed Analysis:

1. Demand of Duty Due to Alleged Shortage of Grey Fabrics:
The demand of ?27,09,029/- was based on the alleged shortage of grey fabrics, which was used to manufacture processed Man Made Fabrics (MMF) and cleared without payment of duty. The appellant argued that the lot register, a statutory record, did not correlate with the alleged shortages and that the grey fabrics entered in the lot register could not be illicitly removed after processing. The appellant also contended that the statement of Shri Gulshan Bhatia, which was used as evidence, was retracted and obtained under duress. The tribunal found that the demand was based on assumptions without proper correlation and that the denial of cross-examination of witnesses violated principles of natural justice. The tribunal relied on precedents that emphasized the necessity of cross-examination to uphold such demands.

2. Demand of Duty Based on Discrepancies in Job Cards:
A demand of ?2,43,369/- was made on the ground that 75,114 L. Mtrs of finished MMF mentioned in job cards were not found in the lot register and were allegedly cleared without payment of duty. The appellant argued that job cards are maintained by workers and may contain errors or omissions. The tribunal held that discrepancies in job cards alone, without corroborative evidence, cannot substantiate the removal of goods without payment of duty. The tribunal emphasized the lack of evidence showing the actual removal and disposal of the goods.

3. Demand of Duty Based on Entries in a Private Register:
The demand of ?55,09,868/- was based on entries in a private register, which allegedly indicated the removal of fabrics without payment of duty. The appellant contended that the private register was maintained by the printing department and did not necessarily reflect unaccounted removals. The tribunal noted that the person maintaining the register was not interrogated, and no evidence of corresponding clearances was found. The tribunal concluded that the private register alone could not form the basis for such a demand.

4. Demand of Duty Based on Substitution of Grey Fabrics in the Private Register:
A demand of ?1,91,678/- was made based on the alleged substitution of grey fabrics in the private register. The tribunal found that the person responsible for maintaining the private register was not questioned, and thus, the demand could not be substantiated. The tribunal emphasized the importance of corroborative evidence and proper investigation in such cases.

5. Imposition of Penalties on the Appellant Unit and Its Director:
Penalties were imposed on the appellant unit and its director under section 11AC and Rule 26, respectively. The tribunal set aside the penalties, citing the lack of evidence and the improper basis for the demands. The tribunal reiterated the need for cross-examination and proper investigation to uphold such penalties.

Conclusion:
The tribunal set aside the impugned order demanding duty and penalties, allowing the appeals with consequential reliefs. The judgment highlighted the importance of cross-examination, proper investigation, and corroborative evidence in substantiating demands and penalties in excise duty cases.

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