2022 (3) TMI 503 - AT - Central Excise

Clandestine Removal - copper wire - denial of cross-examination of panchas/ witnesses and the officials - sufficient evidences or not - cross-examination of witnesses - penalty - HELD THAT - On perusal of the allegations made in the show cause notice and the findings recoded by the respondent-Commissioner in the Order and observed that the entire case of the revenue is based on the resumed documents/kacchi parchies, seized from the factory premises and residential premises of the partner/proprietor of Jindal Cables and Jindal Metal and also on the statements of various persons recorded during investigation. M/s Jindal Cables - HELD THAT - There is no evidence on record brought by the Revenue to prove the flow back of money consideration in respect of the goods alleged to be clandestinely removed. There is no evidence as to how the alleged 92683 kgs of copper wire have been transported as no statement of any transporter has been recorded and placed on record. It is settled proposition that that the demand of duty on goods alleged to be clandestinely removed have to be supported with evidence of procurement of inputs, employment of labour, freight, receipt of consideration, etc. i.e. evidence to corroborate, which is lacking in the present case. Therefore, the duty is levied only on assumption and presumption, as such is fit to be set-aside. Whether the confiscation of goods/raw material etc seized amounting to ₹ 25,41,050/- was proper and legal? - HELD THAT - The entire seizure was made at the factory premises of the Appellant - Jindal Cables and was seized since no documentary evidence for proper accountal of raw material, semi-finished goods, finished goods and scrap was provided, and thus under a reasonable belief that the said goods were procured and manufactured in the clandestine manner for illegal clearances, said goods were seized and confiscated. In this regard, Ld. Counsel for the Appellant - Jindal Cables stated that is admitted that one more manufacturing unit M/s NN Lite was also functioning from the said premises, and the officers should differentiate them - From the perusal of the show cause notice dated 02.05.2012, it is noticed that while making allegations for confiscation, specific ground of allegation is absent. Rule 25(1) contains four clauses i.e., (a) to (d), containing altogether different clauses/grounds but none of them were invoked by the Revenue, it has merely stated as to why the goods be not confiscated under Rule 25 of the Rules. Therefore, confiscation of goods is bad and therefore liable to be set-aside. Currency amounting to ₹ 4,65,000/- seized from the factory premises of the Appellant-Jindal Cables - HELD THAT - It is apparent from the reply filed by the Appellant that out of the total amount ₹ 1,45,283/- belong to the Appellant-Jindal Cables and ₹ 1,78,844/- belonged to M/s NN Lite, ₹ 63,786/- belonged to M/s G.N. Marketing and the balance amount of ₹ 77,087/- could only be explained by Sh. Desh Bhushan Jain from whose custody the currency was seized. The Appellant also provided relevant extract of its cash books and that of M/s NN Lite and M/s GN Marketing. From the perusal of the Order, we find, the cogent explanation given, is not found untrue. Ld. Commissioner should have taken into account the relevant documentary evidence on record and expected to give finding on it - the confiscation of Indian currency in violation of principles of natural justice and also against the evidence on record. Thus, the confiscation is set aside. M/s Jindal Metal - HELD THAT - The ld. Commissioner has not carried out corroboration of the seized private records/kacchi pachies. He should have further summoned the persons whose names were appearing on the private records such as Rajeev, Gupta POT, Nishant, Raju Sagar, Mayank, Ravinder, Vipin, Manoj etc. It is found that the contents of the documents have remain uncorroborated and the law is well settled that the demand cannot be confirmed on the basis of uncorroborated private records. Allegation of clandestine removal of copper ingots is for period from July, 2011 to 4.11.2011. Ld. Counsel for the appellant-Jindal Metal states that for manufacturing copper ingots, the appellant was using the blow furnace which used to work on furnace oil/diesel only. On 5.11.2011, when the factory premises of the appellant was visited, the officers had recorded statement of one Mr. Krishan Kumar driver of the tanker number HR 37 B-8247, who was unloading quantity of diesel on the premises of the appellant - Allegation against the appellant is that he has procured 650591 kgs of copper scrap clandestinely, out of this he had cleared copper ingots and copper rod, collectively weighing 3,99,122 kgs. This entire allegation is based on the recovery of some documents (slips etc.) from the premises. It is also found that no investigation from filling station etc., was made in order to corroborate the receipt of fuel and other raw materials, required or consumed in the manufacture of said huge quantity of copper ingots. The Hon ble High Court of Madhya Pradesh has held in the case of UNION OF INDIA VERSUS MSS FOODS PRODUCTS LTD. 2010 (11) TMI 275 - MADHYA PRADESH HIGH COURT that under the Central Excise Act, 1944, excise duty is leviable on manufacture and production of excisable goods and the same is payable at the time of removal. Therefore, to establish the charge of clandestine removal of excisable goods, it is necessary to establish that the excisable goods were produced or manufactured by the assessee concerned and for attracting Section 11A of the Act, it is necessary to establish that the excisable goods were clandestinely removed without payment of duty. In the present cases, there is lack of sufficient evidence for establishing the above factors, as no sufficient evidence been brought on record by the Revenue. There is no evidence regarding the capacity of Jindal Cables as well as of Jindal Metal to manufacture the quantities as alleged. Further, no inquiries have been conducted from the persons whose names are appearing in the loose papers/kacchi parchies/ private records, raw material suppliers, transporter or the buyers to establish clandestine manufacture and sale by the Appellants - It has been consistent view of the Tribunal that allegation of clandestine removal cannot sustain merely on the basis of uncorroborated entries in the private record. The allegation of clandestine manufacture and removal of finished goods by the Appellants, made in the show cause notice, is merely on assumption and presumption, without sufficient material evidence corroborating the said allegations - the penalty imposed, under Rule 26 of the Central Excise Rules, 2002 on other Appellants i.e., i) Deepak Kumar Gupta - Partner of Jindal Cables; ii) Prop./Director/Partner of M/s Chandra Rolling Mills Pvt. Ltd., and M/s Tirupati Industries, iii) Mr. Rakesh Jain and iv) Mr. D. B. Jain is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Legality of the search and seizure operations.
2. Validity of the evidence collected during the search.
3. Allegations of clandestine manufacture and removal of goods.
4. Confiscation of goods and currency.
5. Imposition of penalties under Rule 26 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Legality of the Search and Seizure Operations:

The search operations were conducted on 05.11.2011 at the premises of M/s Jindal Metals and M/s Jindal Cables. The officers found significant quantities of copper ingots and scrap, which were seized along with certain documents for further investigation. The search at the residential premises of the proprietor also led to the seizure of cash amounting to ?4.64 lakhs. The appellants contested the search operations, arguing that the Panchnamas did not specify the exact locations from where the documents were seized, and the premises were shared by multiple entities, making it unclear which documents pertained to which entity.

2. Validity of the Evidence Collected During the Search:

The evidence collected included physical stock, documents, and statements from various individuals. The appellants argued that the documents seized were not properly identified as belonging to them and that many documents were third-party records. The Tribunal noted that the Panchnamas did not clearly indicate the origin of the documents, and the statements of various individuals were not corroborated by independent evidence. The Tribunal emphasized that the reliance on uncorroborated third-party documents is not sufficient to establish clandestine activities.

3. Allegations of Clandestine Manufacture and Removal of Goods:

The Revenue alleged that M/s Jindal Metals and M/s Jindal Cables were involved in clandestine manufacture and removal of copper ingots and wires without proper documentation and payment of duty. The Tribunal found that the allegations were primarily based on uncorroborated private records and statements. The Tribunal highlighted the lack of independent evidence to support the allegations, such as the absence of proof of excess raw material procurement, transportation details, and flow of money. The Tribunal also noted that the statements of several individuals were either retracted or not reliable without cross-examination.

4. Confiscation of Goods and Currency:

The goods and currency seized during the search were ordered to be confiscated by the Adjudicating Authority. The Tribunal found that the confiscation of goods was not justified as the goods were duly accounted for in the stock registers of the appellants. The Tribunal also set aside the confiscation of currency, noting that the explanation provided by the appellants regarding the source of the cash was not disproved by the Revenue.

5. Imposition of Penalties Under Rule 26 of the Central Excise Rules, 2002:

Penalties were imposed on various individuals and entities under Rule 26 for their alleged involvement in the clandestine activities. The Tribunal set aside the penalties, stating that the charges of clandestine removal were based on assumptions and lacked corroborative evidence. The Tribunal emphasized the need for concrete evidence to impose penalties and held that the statements and documents relied upon by the Revenue were not sufficient to establish the allegations.

Conclusion:

The Tribunal allowed the appeals filed by the appellants, setting aside the impugned order dated 31.01.2018. The Tribunal found that the allegations of clandestine manufacture and removal were not substantiated by sufficient evidence and that the confiscation of goods and currency was not justified. The penalties imposed under Rule 26 were also set aside due to the lack of corroborative evidence. The Tribunal emphasized the importance of independent and concrete evidence in establishing charges of clandestine activities.