2023 (7) TMI 714 - AT - Central Excise

Fraudulent passing of CENVAT Credit - fake invoices - non-functional/non-manufacturing unit - reliance placed on the statement of the witnesses without first cross examining them - entry not made in RG-1 register - suppression of facts or not - Confiscation of seized goods u/r 25 of the Central Excise Rules, 2002 - penalty u/s 11 AC (1)(c) of the Central Excise Act, 1944. Reliance on the statement of the witnesses without first cross examining them - section 9D(1) of the Central Excise Act, 1944 - HELD THAT - The officers of Preventive Branch visited the unit of the appellant on 14.3.2016 and recorded the statement of the Guard, Technical Operator on the same day, thereafter statement of the Proprietor Shri Mohit Gupta and the Accountant Shri Avirag Jain was recorded on 28.3.2016 and 6.4.2016 respectively. The show cause notice was issued on 12.9.2016 , however the appellant did not submit any reply in response thereto and subsequently when the case was fixed for personal hearing on 16.2.2018, 20.2.2018 and 23.2.2018 neither appellant nor his representative appeared and hence the case was proceeded ex parte by the adjudicating authority. When the appellant had chosen not to participate in the proceedings, there was no scope to call for the witnesses for cross examination - the appellant have to be blamed for the violation alleged by them. Secondly, the witnesses examined are not any third parties but the proprietor of the company and their paid employees being the Accountant, Technical Operator and the Guard who are actually aware of the working of the unit. The evidentiary value of their statement is not lost for the reason that the same could not be proved on cross examination. Considering the decision of Delhi High Court in J K CIGARETTES LTD. ORS. AND M/S. GTC INDUSTRIES LTD VERSUS COLLECTOR OF CENTRAL EXCISE ORS. 2009 (8) TMI 64 - DELHI HIGH COURT wherein it had been observed that right of cross examination can be taken away, I am of the considered opinion that test of cross examination in the given circumstances be superfluous. Consequently, the contention of the appellant that no opportunity has been granted to cross examine the witnesses needs to be rejected. The next contention made by the learned counsel for the appellant is that merely because an entry could not be made in RG-1 register, the said goods cannot be termed as unaccounted - HELD THAT - On examining the case records, it is found that it is not a simple case of not accounting the goods in the accounting register but a deliberate attempt to mislead the department, particularly in view of the facts which came to light during the visit to the factory premises as referred to above. Here on the basis of an intelligence that the assessee is involved in fraudulently passing the Cenvat Credit through fake invoices without manufacturing the goods, the unit was kept under surveillance and during the visit by the officers of Preventive Branch, lead ingots weighing 1926kgs valued at Rs. 231120/ were found unaccounted as compared to the recorded balance shown in their statutory records. The learned adjudicating authority rightly observed that from the categorical admittance of non-accountal of their main raw material, i.e. lead ingots, it is established that the assessee was indulging in suppressing the production of finished goods and clearance of finished goods with fraudulent intention of passing the Cenvat Credit in contravention of the provisions of Rule 4,8,10 11 of Central Excise Rules, 2002. The installation of the two furnaces, which are not in use and similarly the D.G. set is only to give a deceptive picture of manufacturing activity. It is nothing but a camouflage with fraudulent intention to avail the Cenvat credit without accounting for the goods. The act of the assessee and the modus operandi adopted was with intent to avail undue benefit which is nothing but playing fraud on the department. It is a settled principle of law that fraud vitiates all solemn acts. The appellant has now taken a stand that the statements recorded were taken under threat or coercion and hence the same cannot be relied upon. The said contention is to be rejected outrightly as the same appears to be just an afterthought as it has never been taken earlier. If the statements were taken under threat or coercion, those persons could have taken objection and retracted those statements at the earliest point of time, however, no such steps were taken in that regard. Confiscation of goods - no evasion of duty on account of fraud, collusion, wilful mis-statement, suppression of facts or contravention of provisions of rules with intent to evade payment of duty - HELD THAT - The goods were brought in the factory premises without having proper invoices/documents with intent to clear them clandestinely. During the visit, the said goods were seized as no record was found to be maintained. Further, the modus operandi of the appellant as revealed from the statement made by the Accountant, Shri Aviraj Jain that the goods purchased from the market were entered in the finished goods register and also entered the same in the register at the time of sale; clearly shows that the manufacture was shown only on the paper. In the entirety circumstances, the lead ingots seized were rightly confiscated and the redemption fine as well as the penalty imposed under Section 11 AC of Central Excise Act read with Rule 25 of Central Excise Rules, 2002 is absolutely justified and no interference is called for. There are no substance in the arguments advanced by the learned Counsel for the appellant - Appeal dismissed.

Summary

Issues Involved:
1. Reliance on witness statements without cross-examination.
2. Allegation of unaccounted goods and related penalties.
3. Confiscation of goods and imposition of fines and penalties.

Summary:

1. Reliance on witness statements without cross-examination:
The appellant contended that the authorities erred in relying on witness statements without cross-examination, contrary to Section 9D(1) of the Central Excise Act, 1944. The Tribunal found that the appellant did not participate in the proceedings or request cross-examination, thus forfeiting this right. The Tribunal referenced the High Court of Delhi's decision in JK Cigarettes, which upheld that the right to cross-examine could be taken away under exceptional circumstances.

2. Allegation of unaccounted goods and related penalties:
The appellant argued that the failure to enter goods in the RG-1 register was a technical omission, not warranting severe penalties under Section 11 AC. The Tribunal disagreed, noting that the appellant was involved in fraudulently passing Cenvat Credit through fake invoices without manufacturing goods. Evidence from the factory visit indicated deliberate non-accounting and suppression of production, justifying penalties.

3. Confiscation of goods and imposition of fines and penalties:
The appellant challenged the confiscation of goods and the imposition of fines and penalties, arguing there was no intent to evade duty. The Tribunal found substantial evidence of fraudulent activities, including non-functional manufacturing facilities and misleading records. The Tribunal upheld the confiscation and penalties, citing the appellant's intent to deceive and the principle that fraud vitiates all solemn acts. The Tribunal referenced several judgments supporting the confiscation and penalties, including the case of Magnum Steels Ltd.

The appeal was dismissed, and the orders of the lower authorities were affirmed.