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2021 (12) TMI 902 - AT - Central ExciseClandestine manufacture and removal - shortage of finished goods or not - relied upon documents for demand not provided, despite written requests - Witnesses neither examined during adjudication nor cross-examination allowed in terms of Section 9D of the Central Excise Act 1944 - time limitation - reconciliation of alleged clearances against GP - discharge of heavy burden to prove their case (by Revenue) - violation of principles of natural justice - HELD THAT - Both the Authorities could have finally decided the case appropriately as the fact finding authorities on ascertaining the facts and circumstances of the case and appreciation of the evidences on critical analysis of records correctly in order to come to rational inference and conclusion whether Appellants had indulged in the alleged clandestine manufacture and/or clandestine removal of the goods. Accordingly, since the case has reached in this Tribunal, it would also be appropriate to finally decide the case in this Tribunal as the final fact finding authority in the facts and law. Appellant has contended that Copies of relied upon documents seized on 03.05.2017 have not been provided despite oral and written requests made by Appellant from the date of seizure for such documents. Appellant has also submitted copies of their letters dated 06.09.2018, 10.04.2019, 02.02.2019 and 25.10.2019 in the Company s Appeal at page Nos. 79 to 83. There is no denial of this fact of non supply of relied upon documents by the Revenue. There was no clandestine removal of goods against the seized Gate Passes, which are also not provided to Appellants to clarify this aspect further. Charge of clandestine removal without payment of duty is not proved. Duty demand in Show Cause Notice dated 18.12.2019 and confirmed by Order-in-Original dated 04.12.2020 is also not sustainable. The duty demand of ₹ 8,89,640/-based on 61 Gate Passes (GP), in absence of positive corroborative evidences, is also not sustainable under the facts and circumstances of this particular case against the Appellants. Shortage of finished Decorative Laminates - HELD THAT - In absence of any such corroborative clinching, positive evidences of excess procurement and use of required Raw materials, packing materials and confirmation from buyers of receipt of such clandestinely removed goods, receipt of sale proceeds etc, and without proper verification of stock of finished goods, the case of clandestine removal is also not proved for demand of ₹ 1,85,994/- - duty demand of ₹ 1,85,994/-is also not sustainable on facts in this case. Cross-examination of witnesses - HELD THAT - Original Adjudicating authority has neither examined nor allowed cross-examination of witnesses whose statements are recorded in investigation and relied upon in this case. These are the only evidence relied upon to confirm the demands in facts of this case. It is settled position in law including the decision of the Hon ble Supreme Court in case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II 2015 (10) TMI 442 - SUPREME COURT , that when cross examination of the witnesses is not allowed u/s 9D of Central Excise Act 1944, then, those statements should not be relied upon for fastening the duty/tax liabilities. Hence, cross examination of the witness was mandatory to arrive at correct fact finding in the interest of justice in the facts of this case. There is no other material placed on record by Revenue to justify excise duty demands. Therefore, the duty demand is also not sustainable on this legal ground as well. Thus, disputed excise duty demands of total Rs, 10,75,634/- (₹ 1,85,994/- ₹ 8,89,640/-), deserves to be set aside - When the duty demand is not sustained, consequential demands of interest and imposition of penalties on both the Appellants would not survive and the same are set aside - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Alleged clandestine manufacture and removal of goods. 2. Alleged shortage of finished goods. 3. Non-provision of relied upon documents. 4. Non-examination and denial of cross-examination of witnesses. 5. Time-barred duty demand. 6. Reconciliation of alleged clearances against Gate Passes (GP). 7. Burden of proof on Revenue. 8. Correctness of fact findings by authorities. Detailed Analysis: 1. Alleged Clandestine Manufacture and Removal of Goods: The appellants argued that there was no clandestine manufacture and removal of goods as alleged. The Tribunal found that the Revenue's case was based on the shortage of finished goods and the seizure of 61 Gate Passes (GP) from the factory. The appellants contended that the allegation of clandestine removal was not proven and that all clearances were under invoices or for exports/samples. The Tribunal observed that the appellants had carried out a reconciliation of the Gate Passes with respective invoices, showing that most goods were cleared on payment of duty or were returned as waste after testing/trials. The Tribunal concluded that the charge of clandestine removal was not substantiated by positive corroborative evidence. 2. Alleged Shortage of Finished Goods: The appellants disputed the alleged shortage of 18,456.33 SQMT of finished Decorative Laminates, asserting no physical verification was conducted during the Panchnama. The Tribunal noted that the appellants provided a notarized affidavit and argued that the manufacture of such a quantity would require significant raw materials, which was not evidenced by the investigation. The Tribunal found that the shortage was not proven without proper verification of stock and corroborative evidence of raw material usage. 3. Non-Provision of Relied Upon Documents: The appellants claimed that the relied upon documents, including the 61 Gate Passes seized on 03.05.2017, were not provided despite multiple requests. The Tribunal recognized this as a violation of the principles of natural justice, noting that the non-supply of these documents undermined the fairness of the proceedings. Consequently, the duty demand based on these documents was deemed unsustainable. 4. Non-Examination and Denial of Cross-Examination of Witnesses: The appellants argued that the Order-in-Original did not examine or allow cross-examination of witnesses whose statements were relied upon. The Tribunal agreed, citing the Supreme Court's decision in Andaman Timber Industries, which established that statements should not be relied upon if cross-examination is not allowed. The Tribunal found that the lack of cross-examination invalidated the reliance on these statements for confirming the duty demands. 5. Time-Barred Duty Demand: The appellants contended that the duty demand was time-barred. However, this issue was not specifically addressed in the Tribunal's decision, as the focus was on the substantive grounds of non-provision of documents and lack of cross-examination. 6. Reconciliation of Alleged Clearances Against Gate Passes: The appellants provided a reconciliation showing that most of the Gate Passes matched with respective invoices and that some goods were returned as waste. The Tribunal found this reconciliation credible and noted that the Revenue did not provide contrary evidence. Thus, the allegation of clandestine removal based on these Gate Passes was not substantiated. 7. Burden of Proof on Revenue: The Tribunal emphasized that the burden of proof was on the Revenue to establish clandestine manufacture and removal of goods. The Tribunal found that the Revenue failed to discharge this burden, as the evidence presented was insufficient to substantiate the allegations. 8. Correctness of Fact Findings by Authorities: The Tribunal criticized both the Original Adjudicating Authority and the Commissioner (Appeals) for not correctly examining and lawfully deciding the submissions made by the appellants. The Tribunal noted that the Commissioner (Appeals) should have decided the appeals on merits rather than remanding the case for re-quantification of duty demand and penalties. Conclusion: The Tribunal set aside the disputed excise duty demands of ?10,75,634/- and the consequential demands of interest and penalties on both appellants. The Tribunal allowed the appeals with consequential reliefs in accordance with law, emphasizing the importance of adherence to principles of natural justice and the burden of proof on the Revenue. The impugned Order-in-Appeal dated 07.09.2021 was set aside, and the appeals were allowed.
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