2022 (5) TMI 648 - AT - Central Excise

Clandestine removal - entries in Booking registers of transport commission agents, can establish clandestine removal or not - third party s records - corroborative evidences or not - preponderance of probability - cross-examination of statements - Section 9D of the Central Excise Act, 1944 - HELD THAT - The allegation of clandestine removal of excisable goods was totally based on entries found/ recorded in the records of transporters and brokers against the name of the appellant and transporters and brokers have admitted in their statements recorded by the department specifically that they have loaded and transported the said alleged goods without the cover of invoices from the premises of the appellant. However, department has not produced any loading advices or consignment notes issued by the transporters in respect of alleged quantity of excisable goods. Further on a careful consideration of the facts and records, it is noticed that mere entries found recorded in the records of said Transporters and brokers are not sufficient to confirm the demand of duty and allegation of clandestine removal. It is settled law that documents recovered from a third party can be used against the manufacturer to prove clandestine removal only when these are supported with corroborative evidences. The Revenue has alleged that huge quantity of finished products have been manufactured and cleared clandestinely without payment of Central Excise duty - the investigation has not tried to approach any of the buyers to corroborate the documents recovered from transporter and broker. The investigation also failed to establish the procurement of raw materials attributed to the huge quantity of alleged clandestine removal. In fact on the date of search, no discrepancy was recorded in respect of stock of raw materials and finished goods vis-a-vis that recorded in statutory records. It is true that the evidence which is required to be produced in quasi judicial proceedings should be such that the charges get established on the basis of preponderance of probability. The standard of evidences need not be as high as in criminal proceedings, where the charges are required to be established beyond reasonable doubts. But in the present case, the allegation of clandestine manufacture and clearance has not been substantiated by any tangible evidences - the law as to whether the third party records can be admitted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established. Undervaluation of the goods - HELD THAT - The data given by M/s Major Minors indicates the daily prices for various sizes of rolling plates as well as mixed melting scraps obtained out of ship breaking activities. After comparing both data revenue found that Appellant have undervalued the scrap and evaded Central Excise Duty. After undergoing the changes in Section 4 in the year 2000, the value of excisable goods is the transaction value and there is no provision to adopt any other deemed value. Therefore only on the basis of rate published in a publication, the transaction value can not be doubted. Except the basis of publication, there is no charge of extra consideration flowing from buyers of goods to the appellant over and above the invoice value. Therefore charge of under valuation has no legs to stand. The demands of duty, interest and penalty are not sustainable in the facts of these cases. Consequential penalty imposed on other Appellants also does not survive - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Allegation of clandestine removal of excisable goods.
2. Demand of excise duty based on third-party records.
3. Confiscation of cash under Section 121 of the Customs Act.
4. Demand of duty on the basis of undervaluation of goods.

Detailed Analysis:

1. Allegation of clandestine removal of excisable goods:
The appellants were accused of evading Central Excise Duty by clandestinely removing goods without issuing invoices. The investigation was based on entries found in the booking registers of transport commission agents. The appellants argued that clandestine removal cannot be established solely on the basis of third-party records. They cited several judgments to support their claim, including SULEKHRAM STEELS P. LTD v CCE and CHARMINAR BOTTLING CO.P. Ltd. V CCE, among others. The tribunal concluded that mere entries in third-party records are insufficient to confirm the demand of duty and allegations of clandestine removal. There must be corroborative evidence such as receipt of raw materials, shortage of raw materials, and other tangible evidence, which was lacking in this case.

2. Demand of excise duty based on third-party records:
The tribunal noted that the entire case was built on the basis of third-party records and statements, which were not corroborated by any tangible evidence. The appellants were not given the opportunity to cross-examine the witnesses, violating Section 9D of the Central Excise Act. The tribunal referenced several judgments, including Andaman Timbers Industries V/s. CCE, Kolkata and BASUDEV GARG V/s. CC, to emphasize the necessity of cross-examination for statements to be admissible as evidence. The tribunal held that the demand based on third-party records without corroborative evidence is not sustainable.

3. Confiscation of cash under Section 121 of the Customs Act:
In the case of M/s. Vijay Kumar & Co., cash amounting to Rs. 17.50 lakhs was confiscated. The appellant argued that the cash was accounted for in their books and was legitimate. The tribunal found that the investigation failed to establish that the cash was generated from the sale proceeds of alleged clandestine removal. The tribunal concluded that the confiscation of cash was illegal as the conditions for confiscation under Section 121 of the Customs Act were not fulfilled.

4. Demand of duty on the basis of undervaluation of goods:
The demand for duty was based on the difference between the invoice value and the rates published by M/s. Major & Minor. The appellants contended that excise duty was paid on the transaction value as per Section 4 of the Central Excise Act, 1944, and there was no evidence of any amount being received over and above the invoice price. The tribunal agreed with the appellants, stating that the transaction value is the basis for excise duty and the publication rates cannot be used to doubt the transaction value.

Conclusion:
The tribunal held that the demands of duty, interest, and penalties were not sustainable due to the lack of corroborative evidence and the failure to provide cross-examination opportunities. Consequently, all appeals were allowed with consequential reliefs as per the law.