2023 (4) TMI 825 - AT - Central Excise

Clandestine manufacture of labelled and unlabelled biris - Non-issuance of proper invoices - reasonable doubt and mere suspicion or sole entries in certain records - denial of cross-examination - violation of principles of natural justice - period January, 2007 to September, 2008 - HELD THAT - While recovery of the private records from the premises of the appellant have not been disputed. The appellants have denied lack of complete knowledge thereto as well as its contents. It has been their case that the said register does not belong to them and could have been left behind at their premises by one of the several traders visiting their premises. It is on the basis of this register that the charge for duty evasion during the period January, 2007 to September 2008 has been worked upon - it is well settled that mere entries in a diary/register or other records, without any corroborative evidence cannot be the basis to fasten the short-levy and uphold the charge of clandestine manufacture and clearance. To sustain the charge of clandestine manufacture and clearance without duty payment, other corroborative evidence is required in support and merely on the strength of statistical data, the charge of duty evasion cannot be upheld. The charge of clandestine clearance is required to be proved beyond an iota of doubt and by irrefutable evidence. Then only can imposition of duty liability on the said goods is sustainable. Thus other tangible, sufficient and corroborative piece of evidence is necessary to establish the charge of clandestine manufacture and clearance. Each link in the process is required to established - The burden to establish the factum of clandestine clearance is upon the revenue and required to be established beyond all reasonable doubt and mere suspicion or sole entries in certain records whose authenticity itself is under challenge cannot be the singular yardstick to uphold such a contention. It is settled law that the noticee has to be offered all reasonable opportunity of defence and any levy fastened denying natural justice is clearly unsustainable - the twin facets of non-supply of certain records more particularly DSA inform RG-12A and the lack of opportunity of cross examination of the witnesses are in clear violation of legal principles rendering the impugned order unsustainable. In fact, non-consideration of a contention raised in defence is not only prone to mis-carriage of justice, but is also reflective of non-application of mind. The noticee had in proceedings before lower authority made a very strong assertion requesting for copies of said documents containing references of Central Excise Invoices and by non-supply thereto, he has been denied an appropriate opportunity for his defence. Likewise, for want of recovery of any non-duty paid stocks from the buyers as well as other independent records in support of the claim of clandestine manufacture and clearance, the charge cannot be sustained on a mere bland statement/allegation made by purchasers. Moreover, denial of cross-examination of these witnesses only accentuates the claim in pursuit of a free, fair exploration of truth and justice. The impugned order, therefore, suffers from this inherent infirmity for failure to comply with natural justice - Appeal allowed.

Summary

Issues Involved:
1. Allegations of clandestine manufacture and clearance of biris.
2. Denial of natural justice and opportunity for cross-examination.
3. Non-supply of crucial documents for defense.

Summary:

1. Allegations of Clandestine Manufacture and Clearance:
The appellants were accused of manufacturing and storing 20,13,500 sticks of biris in excess without accounting for them in the Daily Stock Account (DSA) and clearing 1,41,000 sticks without issuing invoices. Investigations alleged that between January 2007 and September 2008, the appellants clandestinely manufactured and cleared 13,34,36,375 sticks of handmade branded biris without issuing Central Excise Invoices or accounting for them in official records. This led to a show-cause notice demanding Excise duty of Rs.19,38,504/- and proposing confiscation, penalties, and interest.

2. Denial of Natural Justice and Opportunity for Cross-Examination:
The appellants claimed they were denied an opportunity to defend themselves, violating the principles of natural justice. They were not provided with the DSA/ER-I in Form RG-12A Register seized by the Central Excise Officers and were denied the chance to cross-examine key witnesses. The Commissioner (Appeals) rejected their plea for cross-examination, stating that the buyers' statements were not given under duress and were not retracted.

3. Non-Supply of Crucial Documents for Defense:
The appellants argued that the DSA in RG-12A form was crucial for their defense and should have been returned by the Department. The Department's failure to provide these documents hampered the appellants' ability to mount an appropriate defense. The Tribunal noted that the Department is obliged to return both relied upon and un-relied upon documents recovered from the appellants' premises.

Tribunal's Findings:
The Tribunal found that mere entries in private records without corroborative evidence cannot substantiate charges of clandestine manufacture and clearance. The burden of proof lies on the revenue to establish the fact of clandestine clearance beyond all reasonable doubt, which was not met in this case. The Tribunal emphasized the importance of cross-examination for ascertaining the truth and delivering justice. The denial of cross-examination and non-supply of crucial documents were deemed violations of legal principles, rendering the impugned order unsustainable.

Conclusion:
The appeal was allowed, and the order of the Commissioner (Appeals) was set aside. The cross objections filed by the Revenue were also disposed of in the same terms. The judgment underscores the necessity for corroborative evidence and adherence to principles of natural justice in adjudication processes.