2021 (8) TMI 938 - AT - Central Excise

CENVAT Credit - inputs not received in the factory premises - purchase of inputs from the suppliers on high seas sales basis - cross-examination of persons whose statements were taken - additional corroborative evidences present - challenge to penalty of much less amount by only 1 co-noticee among 19 co-noticees - maintainability of appeal - HELD THAT - The impugned appeal is filed by only one co-noticee among said 19 co-noticees that too with respect to the amount of penalty confirmed against him i.e. 10, 000/-. This observation is sufficient to hold that the present appeal is challenging the imposition of penalty of much less amount than the pecuniary limit of the Single Bench of this Tribunal. Therefore the appeal can definitely be heard by this Single Member Bench. Earlier the demand against the appellant was confirmed based on the statements recorded by the investigating officers at the time of investigation itself. None of those witnesses were allowed to be cross-examined by the appellant despite his request. The present order under challenge is the order at second round of litigation where the adjudicating authority below - It is observed that though the said Final Order has been complied with by the adjudicating authority as 13 out of 40 witnesses have been cross-examined. But it is perused that the outcome of the cross-examination has not at all been considered while passing the impugned order. It is clearly apparent from the testimony of the witnesses cross-examined that their earlier statements were got recorded forcibly under pressure with use of coercion. It has been the deposed by most of the witnesses during their corss-examination that nickel was very-much available in the factory of M/s. JVIPL at the time of the visit by the Department but was still not shown in Panchnama by the Investigating Officers due to reasons best known to the Department. The witnesses have specifically stated that M/s. JVIPL otherwise used to make copper-nickel alloys. There is no effort apparent on the part of the Department to ascertain the exact temperature range required of a furnace to melt nickel. None of the expert had suggested that the fire furnace of M/s. JVIPL was actually not capable of attaining the melting point of the nickel. Despite this absence the Commissioner has placed utmost reliance on the said statement. His findings are accordingly held to be unreasonable and unjustifiable and nothing more than presumptive - Apparently there is no physical inspection by the investigating team about the process of manufacture being adopted by M/s.JVIPL. In the absence thereof the mere fact that M/s. JVIPL had no such furnace as is required for melting nickel purchased from the appellant that too without any evidence verifying the same is not sufficient to fasten the liability upon the appellant to the extent of imposition of penalty alleging his involvement in the alleged clandestine production by M/s. JVIPl. The findings of adjudicating authority below being highly presumptive are absolutely insufficient for imposition of penalty upon the raw-material supplier of such manufacturer i.e. the appellant - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Jurisdiction of the Tribunal.
2. Imposition of penalty based on statements and evidence.
3. Compliance with previous Tribunal orders regarding cross-examination.
4. Reliance on expert opinions and evidence.
5. Presumption and surmises in forming findings.
6. Lack of tangible evidence and physical inspection.

Issue 1: Jurisdiction of the Tribunal

The Tribunal observed that the appeal challenged a penalty amount well below the pecuniary limit for a Single Member Bench, thus determining it could be heard by the Single Member Bench. This allowed the Tribunal to proceed with adjudication on merits.

Issue 2: Imposition of penalty based on statements and evidence

The penalty against the appellant was primarily based on the statement of the appellant's Director, indicating knowledge that the nickel sold to another party was not being used due to a furnace incapability. The Department linked this to the non-use of nickel in the manufacturing process, citing furnace temperature limitations. However, the Tribunal found this basis insufficient due to lack of concrete evidence and reliance solely on statements.

Issue 3: Compliance with previous Tribunal orders regarding cross-examination

The Tribunal noted that the previous order directed the authority to allow cross-examination of witnesses, which was partially fulfilled. However, the outcome of these cross-examinations was not adequately considered in the impugned order, leading to a failure in due process and consideration of evidence.

Issue 4: Reliance on expert opinions and evidence

The Commissioner heavily relied on expert statements without allowing for cross-examination, leading to unjustifiable findings. Contradictory expert opinions and lack of verification regarding furnace capabilities to melt nickel raised doubts about the reliability of the evidence presented.

Issue 5: Presumption and surmises in forming findings

The findings of the Commissioner were deemed to be based on presumptions and surmises, lacking concrete evidence to support the conclusions drawn. The absence of substantial evidence to support allegations weakened the basis for imposing penalties.

Issue 6: Lack of tangible evidence and physical inspection

The Tribunal highlighted the absence of tangible evidence and physical inspection of the manufacturing process, crucial for establishing liability. Without concrete proof of connivance or knowledge on the part of the appellant, the imposition of penalties was considered unjustified.

In conclusion, the Tribunal set aside the findings of the adjudicating authority, deeming them presumptive and insufficient for penalizing the raw-material supplier. The appeal was allowed based on the lack of tangible evidence supporting the allegations against the appellant.