2024 (1) TMI 247 - AT - Central Excise

Clandestine removal of goods - removal on the basis of panchnama and statements of various persons - cross- examination which is mandated under Section 9D of Central Excise Act,1944 not allowed - HELD THAT - There is no evidence of clandestine clearance of galvanized MS wires from the factory of the appellant being a job worker. No investigation has been carried out with the transporter, not a single buyer was brought on record who allegedly purchased the clandestinely removed goods. There is absolutely no evidence of any payment received against the alleged clandestine removal. The most important is that admittedly the case of the department is that the appellant have cleared the job work goods clandestinely, if this be so, the owner of the goods is the principal manufacturer of the goods who were not interrogated or investigated to ascertain that they being owner of the goods are aware of clandestine removal and whether the money received by them or the job workers. There is no tangible evidence to prove the clandestine removal beyond doubt - the demand, interest and penalties set aside - Since the demand of the main appellant manufacturer is not sustained, the penalties on other persons which are consequential to the demand of duty from the main appellant, shall also not sustain. The impugned order is set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are related to alleged clandestine removal of goods, liability of central excise duty on job worker, cross-examination of witnesses, and lack of evidence for clandestine clearance.

Alleged Clandestine Removal of Goods:
The case involved the appellant company engaged in manufacturing and clearance of armoured wires/strips, undertaking job work activities for galvanizing MS wires received from principal manufacturers. The central excise department alleged diversion of quantities of galvanized MS wires as clandestinely cleared from the factory. Statements of company officials were recorded, leading to a show cause notice and subsequent appeals.

Liability of Central Excise Duty on Job Worker:
The appellant argued that as a job worker, the liability for central excise duty on galvanized wires should rest with the principal manufacturers who sent the wires for galvanizing. Additionally, it was contended that galvanizing MS wires does not amount to manufacture. The appellant maintained records of receipt and return of wires, disputing any clandestine clearance.

Cross-Examination of Witnesses:
The Adjudicating Authority was criticized for not allowing cross-examination of witnesses, which is mandated under Section 9D of the Central Excise Act, 1944. The judgment highlighted the importance of cross-examination to establish the reliability of witness statements in cases of alleged offenses under the Act.

Lack of Evidence for Clandestine Clearance:
The Tribunal found that the department's case relied heavily on statements and panchnama, without substantial evidence of clandestine clearance. No investigation was conducted with transporters or buyers of allegedly cleared goods. The lack of tangible evidence to prove clandestine removal beyond doubt led to the setting aside of the demand, interest, and penalties imposed. The judgment emphasized the need for concrete evidence to establish allegations of clandestine activities.

Conclusion:
In conclusion, the impugned order was set aside, and the appeals were allowed based on the lack of substantial evidence supporting the allegations of clandestine removal. The judgment highlighted the importance of due process, including cross-examination of witnesses, and the necessity of tangible evidence to establish liability and penalties in central excise duty cases.