2019 (8) TMI 958 - AT - Central Excise

Clandestine Removal - basis of demand is the data contained in pen drive - Also it is alleged that the Partner accepted the removal of goods - variation in electricity consumption - HELD THAT - At the time of the visit of the officers, no discrepancy in raw material or finished goods were found. There is no evidence of any excess raw material purchased by the Appellant and the correlation of production and clearance is not appearing with such procurement of raw material. The statements of Partners though relied upon, but only on the basis of such statements, the charges of clandestine removal cannot be substantiated unless supported by corroborative evidences. Moreover, such statements were recorded on the basis of production note book, diaries but since the demand is not based on pen drive data as computation was done only on the basis of pen drive data that too containing intermediate product casting, the statements are of no help to revenue. The Revenue could not produce any evidence regarding variation in consumption of electricity nor there is any allegation of disproportionate consumption of electricity - This Tribunal in case of AUM ALUMINUM PVT. LTD. VERSUS COMMISSIONER OF C. EX., VADODARA 2012 (4) TMI 557 - CESTAT AHMEDABAD held that when there is no evidence of clandestine manufacture, clandestine/dis-apropriate/unaccounted purchase/receipt and consumption of raw material and packing material, required for manufacturing alleged quantity of final product clandestinely removed from the factory. The freight payment for any such movement, un authorized payment for procuring unaccounted raw material and packing material, disproportionate power consumption, capacity utilization and labour employed, unaccounted sales proceeds in substantial cash from factory or other premises or any other else in direct control of assesses, backed by any confirmation oral or written from person giving such cash against goods removed in clandestine manner without payment of duty from the factory, there cannot be case of clandestine removal. In the present case also all the above element are absent as the investigating agency could not established the excess production, excess raw material purchase, payment there against, receipt of sale proceeds against such huge alleged quantity of clandestine removal of goods, therefore, the demand merely based on data retrieved from pen drive cannot be sustained. The department has taken the quantity of casting from the pen drive, however, the clandestine removal of casting was neither alleged not established. The pen drive data contained the quantity of job work goods carried out by the appellant which is otherwise not liable to duty but department has not bothered to verify the same despite a categorical submission made by the appellant before the lower authority. It is also fact that appellant could not have been produced such huge quantity during the relevant period. Penalty on partners - HELD THAT - When demand itself not sustainable, penalties are also not maintainable - Moreover, as of now, it is settled law in the judgments of Jurisdiction High Court in case of PRAVIN N. SHAH VERSUS CESTAT 2012 (7) TMI 850 - GUJARAT HIGH COURT and COMMISSIONER OF CENTRAL EXCISE VERSUS JAI PRAKASH MOTWANI 2009 (1) TMI 501 - GUJARAT HIGH COURT that in case of partnership concern, a separate penalty on partners cannot be imposed. The demand and penalties imposed by the impugned order against the Appellant unit is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Validity of the demand for Central Excise Duty.
2. Reliance on statements without cross-examination.
3. Basis of demand using pen drive data.
4. Allegations of clandestine removal.
5. Penalty on partners and co-appellants.

Issue-Wise Detailed Analysis:

1. Validity of the demand for Central Excise Duty:
The demand for Central Excise Duty of ?6,91,03,160/- was confirmed against M/s Gold Metal Extrusions and equivalent penalties were imposed. The case was based on seized documents and statements indicating unaccounted production and clearance of goods. However, the appellant contested that the demand was not sustainable as it relied on unverified data from a pen drive and statements without corroborative evidence.

2. Reliance on statements without cross-examination:
The appellant argued that the statements of alleged buyers, recorded without allowing cross-examination, could not be relied upon. They cited several judgments, including Andaman Timber Industries (2015) and Vishwa Traders Pvt. Ltd. (2012), which emphasize that statements cannot be used as evidence if cross-examination is denied, as it violates principles of natural justice. The tribunal agreed, noting that the adjudicating authority should have granted cross-examination as mandated under Section 9D of the Central Excise Act, 1944.

3. Basis of demand using pen drive data:
The demand was primarily based on data retrieved from a pen drive, which the appellant claimed included non-excisable transactions such as high seas sales, job work, and intermediate products. The tribunal found inconsistencies in the show cause notice, which relied on different sets of documents (notebooks, diaries, gate passes) but raised the demand based on pen drive data. The tribunal emphasized that without corroborative evidence, the pen drive data alone could not substantiate the demand.

4. Allegations of clandestine removal:
The tribunal noted that the investigation did not provide sufficient corroborative evidence of clandestine removal. Statements from buyers and transporters were not supported by documentary evidence of receipt of goods. The tribunal cited multiple judgments, including those in cases like Vishwa Traders Pvt. Ltd. (2012) and Emtex Synthetics Ltd. (2003), which held that allegations of clandestine removal require concrete evidence of raw material procurement, production, and clearance, which was lacking in this case.

5. Penalty on partners and co-appellants:
The tribunal held that since the primary demand was not sustainable, the penalties on the company and its partners also could not stand. It referred to the judgment in Pravin & Shah (2014) and Jaiprakash Motwani (2010), which established that separate penalties on partners of a partnership firm are not permissible.

Conclusion:
The tribunal set aside the impugned order, holding that the demand and penalties were not sustainable due to lack of corroborative evidence, denial of cross-examination, and inconsistencies in the basis of the demand. The appeals were allowed, and the order was pronounced in the open court on 20.08.2019.