2021 (4) TMI 496 - AT - Central Excise

Clandestine manufacture and removal - copper wire ingots - entire documents on which the demand has been confirmed, recovered from the factory premises of M/s Kaycee Electricals and from the residential premises of its Partners - corroborative evidences or not - third party evidences - HELD THAT - Apparently and admittedly, no search was conducted in premises of any of the present appellants. No physical verification of the stock of present appellants was conducted. Both the show cause notices, the initial order-in-original and the impugned order under challenge are based merely upon the loose parchies and other handwritten documents as was recovered from the premises of M/s Kaycee Electricals and also on the basis of statements of the Supervisor as well as Partner that too of M/s Kaycee Electricals itself. The entire evidence is therefore nothing but a third party evidence - neither the documents as were recovered from the premises of M/s Kaycee Electricals can be read against the appellants nor the statements of employees of M/s Kaycee Electricals can be considered to be the admission on part of appellants Section 31 of Evidence Act has also been wrongly applied. Section opens up saying that admissions are not conclusive proof, but may estop. The intent of section 31 of Evidence Act is also that admissions can always be explained and can be shown to be wrong. It is in the absence of such explanation that the admission may estop the maker thereof - Law is settled that burden of proof for alleged clandestine removal of goods by appellant is upon the department. Section 31 and 58 of Indian Evidence Act are held not applicable to the given facts and circumstances. The Adjudicating Authorities below are warned to make complete proper compliances of the orders of remand. They need to be careful while making the interpretation of the orders of the Tribunal - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Clandestine removal of copper ingots.
2. Validity of evidence based on statements and documents recovered.
3. Application of Sections 31, 58, and 106 of the Indian Evidence Act.
4. Compliance with the Tribunal's remand order for denovo adjudication.

Detailed Analysis:

1. Clandestine Removal of Copper Ingots:
The primary issue revolves around the alleged clandestine removal of copper ingots by the appellants, which was initially adjudicated by a common order-in-original dated 27.03.2009. This order was challenged and remanded by the Tribunal for denovo adjudication. The impugned order dated 26.10.2018, passed after remand, dropped the proceedings against M/s Kaycee Electricals and its Partner but confirmed the demand and penalties against M/s M. S. Metal Co., M/s Master India Pvt. Ltd., and M/s Smita Global Pvt. Limited.

2. Validity of Evidence Based on Statements and Documents Recovered:
The evidence against the appellants was primarily based on kachha parchies and statements recovered from M/s Kaycee Electricals. The appellants argued that since the demand against M/s Kaycee Electricals was dropped, there was no basis for confirming the demand against them. They also contended that the statements recorded during the investigation were made under threat of arrest and were retracted during cross-examination. The Tribunal observed that the reliance on these statements by the Adjudicating Authority was improper as they were not voluntary, cogent, or convincing.

3. Application of Sections 31, 58, and 106 of the Indian Evidence Act:
The Tribunal found that the Adjudicating Authority improperly applied Sections 31, 58, and 106 of the Indian Evidence Act. Section 58 pertains to admissions being admissible without further proof if they are voluntary and clear. The Tribunal noted that the statements recorded under threat do not qualify as admissions under Section 58. Section 31 states that admissions are not conclusive proof but may estop; however, the Tribunal highlighted that admissions can be explained and shown to be erroneous. Section 106, which shifts the burden of proof to the person having special knowledge of the facts, was also deemed inapplicable as the burden of proving clandestine removal lies with the Department.

4. Compliance with the Tribunal's Remand Order for Denovo Adjudication:
The Tribunal's earlier remand order required the Adjudicating Authority to provide an opportunity for cross-examination of witnesses. However, during the denovo proceedings, only two witnesses appeared and retracted their previous statements, claiming they were made under duress. The Tribunal criticized the Adjudicating Authority for not properly complying with the remand order and for misinterpreting it. The Tribunal emphasized that the evidence used against the appellants was third-party evidence, which is insufficient to uphold the findings of clandestine removal.

Conclusion:
The Tribunal set aside the impugned order dated 26.10.2018, criticizing the Adjudicating Authority for improper compliance with the remand order and misapplication of legal provisions. The Tribunal highlighted the necessity for voluntary and clear admissions and the burden of proof lying with the Department for allegations of clandestine removal. Consequently, all four appeals were allowed, and the Adjudicating Authorities were warned to ensure proper compliance with remand orders in the future.

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