2022 (5) TMI 7 - AT - Central Excise

Clandestine removal - Ceramic Tiles - clearance against parallel Invoices recovered from Labourer s room in factory - demand based on statements relied upon - cross-examination of statements not done - levy of penalty on partner - HELD THAT - Appellant s Factory was searched on 01-01-2010 and some Invoices pink coloured Duplicate for Transporter were found. Inculpatory statements of partners were recorded. But no variation in inventory of finished goods or raw materials was found during search. In follow up actions business premises of the three dealers namely M/s Arbuda Marketing Himatnagar M/s Jain Jain Himatnagar and M/s Trimurti Enterprise Himatnagar were searched and their relevant purchase sales Bills were withdrawn for months August 2009 to December 2009. No offending goods were recovered from any of these premises or from any other premises. During Enquiries with Transporters the document like bilty issued to Appellant for November 2009 and December 2009 were also withdrawn. During inquiry at Buyer s end Statements of 9 persons were recorded. SCN for the duty demand of Rs. 14, 04, 620/- was issued on 04-07-2013. Revenue has not produced any clinching positive evidence of receipt of goods by the buyers. Revenue has not proved their case in respect of 115 Invoices where duty is confirmed by Order-In-Original dated 31-08-2018. There is no evidence either in the form of their statements or any other corroborative evidence in respect of those 115 Invoices and buyers who are shown in Annexure A-2 as buyers of goods in respect of Invoices. The Commissioner (Appeals) has also not examined these facts critically. There is no clear evidences of removal of goods from factory premises except statements relied upon whose examination/cross examination has not been allowed u/s 9D of Central Excise Act 1944. Invoices found are pink coloured Duplicate for transporter but it is not coming out from records that goods were actually transported out of factory against those Invoices relied upon. Invoices pink coloured Duplicate for transporter are found in factory hence it can also be inferred logically that goods were not transported out of factory against the said Invoices named as parallel Invoices in facts of this case. Duty demand of Rs.8, 66, 588/- is confirmed without ascertaining actual manufacture of goods and removal thereof from factory - Revenue has relied upon statements without cogent evidence of receipt and consumption of quantity of basic raw materials and packing materials required for manufacture of goods cleared on parallel Invoices payment for procuring excess raw materials and packing materials used for manufacture of goods cleared. There is no corroborative evidence of removal of goods twice on the same Invoice or on parallel Invoices and receiving payment twice for Invoices. It is found that except statements there is nothing on record to establish Revenue s case of clandestine manufacture or removal of goods from Appellant s Factory in the facts of this case. It is well settled by decisions of Tribunals and higher forums that for cases of such alleged clandestine manufacture and clearances fundamental criteria have to be established by the Revenue and there should be tangible evidence of clandestine manufacture and clearance of such goods and not undue inferences or unwarranted assumptions. There should be clinching positive evidence on record in support of case of clandestine manufacture and clearances. Statements made under Section 14 of Central Excise Act 1944 becomes admissible evidence when person is examined and his/her cross examination is allowed under Section 9D of Central Excise Act 1944. Separate penalty is imposed on Shri Dineshbhai Patel - HELD THAT - The penalty Separate penalty imposed is not justified following the decision of the Hon ble Gujarat High Court in the case of PRAVIN N. SHAH VERSUS CESTAT 2012 (7) TMI 850 - GUJARAT HIGH COURT and in RATHI RE-ROLLING MILLS VERSUS COMMISSIONER OF CENTRAL EXCISE 2015 (2) TMI 1125 - BOMBAY HIGH COURT where it was held that Penalty has been imposed on the firm no separate penalty can be imposed on its partner - Such penalty imposed on Shri Dineshbhai Patel deserves to be set aside. Demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against Order-in-Appeal confirming excise duty demand and penalty
- Allegations of clandestine clearance of Ceramic Tiles
- Adjudication process and penalties imposed on the partners
- Cross-examination of witnesses and evidence presented
- Confirmation of duty demand and penalties by the Commissioner (Appeals)

Analysis:
1. The appeal was filed against the Order-in-Appeal confirming excise duty demand and penalties imposed on M/s Sohni Ceramics and its partner. The case involved allegations of clandestine clearance of Ceramic Tiles by the appellant. The search conducted in the factory resulted in the recovery of duplicate invoices, leading to the excise duty demand. The investigation included statements of partners and others, and penalties were imposed under Section 11AC of the Central Excise Act, 1944.

2. The adjudication process involved multiple rounds of litigation, with the case being remanded back to the Original Adjudicating Authority for fresh adjudication. In the second round, cross-examination of witnesses was allowed, and the duty demand was revised. The duty demand confirmed was based on seized invoices that did not tally with regular sales invoices. However, the adjudicating authority failed to critically examine the evidence presented, especially regarding the receipt of goods by buyers mentioned in the invoices.

3. The findings in the second round of litigation raised doubts about the clandestine removal of goods as alleged by the Revenue. The lack of concrete evidence, apart from statements, to prove the manufacture and removal of goods clandestinely twice on parallel invoices weakened the Revenue's case. The duty demand was confirmed without sufficient evidence of actual manufacture and removal of goods from the factory, leading to the conclusion that the charge of clandestine removal was not substantiated.

4. The separate penalty imposed on one of the partners was deemed unjustified, and it was set aside based on precedents and legal principles. The judgment concluded that the Order-in-Appeal confirming duty, interest, and penalty was not sustainable due to the lack of clear evidence supporting the Revenue's case. Consequently, the penalties imposed on both appellants were set aside, and the impugned Order-in-Appeal was modified accordingly.

5. In the final decision, the appeals by both appellants were allowed, providing them with consequential reliefs as per the law. The judgment highlighted the importance of tangible evidence and adherence to legal procedures in cases involving allegations of clandestine activities to establish a strong case.