2022 (11) TMI 632 - HC - Central Excise

Clandestine removal - Sir Brand Gutkha and Pan Masala - requirement of corroboration from any other independent evidence of the retracted confessional statement - demand of duty based on the third party documents supported by corroborative statements, justified or not - entire evidence on record and statements of the witnesses and concerned persons, ignored - statements recorded under provisions of Section 14 of CE Act by the officers of the Department can be taken as proof of the statutory violations by the respondents or not - confiscation - redemption fine. Whether any substantial question of law arises for consideration in this appeal so as to admit it for examination within the scope of sub-section (3) and (4) of Section 35-G? - HELD THAT - There is no dispute with regard to the factual findings recorded by the CESTAT that all persons including the Authorized Signatory of the manufacturers in their cross-examination before the Adjudicating Authority had retracted from their statements recorded under Section 14, during investigation, with the categorical statements that their previous statements were recorded by the officers of the Central Excise Department under duress - The findings returned by the Adjudicating Authority that Sri Rajesh Agarwal in his various voluntary statements and acceptance had confirmed his active involvement in the tax evasion by management of raw materials and managing removal of clandestinely manufactured Sir Brand Gutkha/ Pan Masala to various destinations, thus, suffers from apparent perversity. On the basis of the said findings and in view of the statement of Sri Rajesh Agarwal, the Authorized Signatory of three manufactures in his cross-examination, it cannot be accepted that his statement recorded by the Central Excise Officers was voluntary. The question is not of admissibility of the statement recorded under Section 14. The admissibility of the evidence recorded by the investigating authority, when the persons making statements were examined as a witness before the Adjudicating Authority is not under question. The issue is about the weight of the evidence appreciated by the Adjudicating Authority - No presumption or assumption can be drawn to record any perversity in the findings of the CESTAT, the Appellate Tribunal, which has recorded that the appellants manufacturers are neither consignor or consignee for the alleged transportation of goods in the third party transporters records. No question of law much less substantial question of law arises for consideration, in the facts and circumstances of the case, inasmuch as, no perversity can be seen in the decision of the CESTAT in setting aside the findings of the Adjudicating Authority based solely on the retracted confessional statements recorded during investigation under Section 14 of the Act by the officers of the Central Excise Department - Appeal dismissed.

Summary

Issues Involved:
1. Corroboration of retracted confessional statements.
2. Justification of duty demand based on third-party documents.
3. CESTAT's consideration of evidence and witness statements.
4. Setting aside or reducing demand, redemption fine, and confiscation of goods.
5. Admissibility of statements recorded under Section 14 of the Central Excise Act.

Issue-wise Detailed Analysis:

1. Corroboration of Retracted Confessional Statements:
The revenue argued that the CESTAT erred in setting aside the demand based on the retracted confessional statements, asserting that these statements did not require corroboration from other independent evidence. The Adjudicating Authority had relied on these statements, especially those of Sri Rajesh Agarwal, who did not retract his statements, to substantiate the clandestine removal of goods. However, the CESTAT found that the statements recorded during the investigation were involuntary and obtained under duress, thus lacking evidentiary value without corroboration.

2. Justification of Duty Demand Based on Third-Party Documents:
The revenue contended that the demand of duty based on third-party documents, supported by corroborative statements, was justified. They presented evidence of searches and seizures from various premises, including transporters and railway stations, indicating clandestine clearance of goods. However, the CESTAT concluded that the demands were primarily based on third-party records and statements, which were either retracted or did not withstand cross-examination, rendering them unreliable.

3. CESTAT's Consideration of Evidence and Witness Statements:
The revenue challenged the CESTAT's decision, arguing that it ignored the entire evidence on record and the statements of witnesses. They emphasized that the statements recorded under Section 14 of the Central Excise Act should be taken as proof of statutory violations. The CESTAT, however, found that the statements were recorded under coercion and lacked corroborative evidence. The Tribunal held that without substantial evidence to support the third-party documents, the allegations of clandestine removal could not be confirmed.

4. Setting Aside or Reducing Demand, Redemption Fine, and Confiscation of Goods:
The revenue argued that the CESTAT unjustifiably set aside or reduced the demand, redemption fine, and confiscation of goods by ignoring material facts. The CESTAT, after examining the entire material on record, concluded that the demands were based on unreliable third-party records and retracted statements. The Tribunal emphasized the need for clinching evidence to prove clandestine removal, which was not provided by the revenue.

5. Admissibility of Statements Recorded Under Section 14 of the Central Excise Act:
The revenue maintained that statements recorded under Section 14 of the Central Excise Act could be admitted as evidence. However, the CESTAT and the High Court referred to legal precedents, including the decision in M/s. Jindal Drugs Pvt. Ltd. and another vs. Union of India, which highlighted the need for statements to be tested under Section 9D of the Central Excise Act before being admitted as evidence. The High Court noted that the statements recorded under duress could not be given evidentiary value without corroboration.

Conclusion:
The High Court dismissed the appeals, upholding the CESTAT's decision. It found no substantial question of law arising from the case and emphasized that the findings of the CESTAT were not perverse. The court reiterated the necessity of clinching evidence to prove clandestine removal and held that the retracted statements, lacking corroboration, could not substantiate the revenue's claims. The appeals were deemed devoid of merit and were dismissed accordingly.