2024 (2) TMI 431 - AT - Central Excise

Clandestine removal - Tar Catcher - demand on the basis statements of parties/buyers, one supplier of raw material, and one director of the appellant - admissible evidence or not - HELD THAT - The allegation of clandestine production and removal are required to be arrived at on the basis of positive and tangible evidences including the evidences relating to procurement of raw-materials, conversion of the same to final products, clearances of the same and identification of the buyers and receipt of unaccounted cash etc. It has been the ratio of various decisions of the higher courts that mere entries in the private records, do not, ipso facto, lead to the allegation of clandestine removal unless there is corroborative evidence to that effect from independent sources - It is well settled that the charges of clandestine removal are required to be made on the basis of positive and tangible evidence, the same being quasi-criminal in nature. The Revenue has miserably failed to produce corroborative evidence on records so as to substantiate the charges of clandestine removal. In the absence of corroborative evidence, in the present case the charge of clandestine clearance cannot be levelled against the appellant. The adjudicating authority has not followed the procedure as prescribed under Section 9D of the Central Excise Act for placing reliance on the statements of said witnesses - The provisions of Section 9D of the Central Excise Act, 1944 is very clear and by now, it is well-settled legal position that the Adjudicating Authority, if he intends to rely on the contents of any statement recorded under the Central Excise Act, 1944, then the procedure, as prescribed under Section 9D, has to be followed scrupulously. In the present case, it is found that the statements were relied upon as corroborative evidences and the cross-examination of witnesses who made such statements was denied without valid ground. It is found that, the admissibility of these evidences is legally not sustainable, and the same cannot be the basis for confirmation of duty on the goods allegedly manufactured and cleared by the appellant. It is observed that in the present case also the goods were lying within the appellant s factory. There was no evidence on record to show that there was any attempt to remove those goods clandestinely without payment of duty - the goods in question were not liable to confiscation. Accordingly, the confiscation of the goods set aside - the impugned orders cannot be sustained - appeal allowed.

Summary

Issues Involved:
1. Credibility and reliability of evidence (Note Books and statements).
2. Compliance with Section 9D of the Central Excise Act.
3. Allegation of clandestine manufacture and removal.
4. Confiscation of goods found in the factory.

Summary:

Credibility and Reliability of Evidence:
The Appellants argued that the credibility and reliability of the Note Books are lost as only 5 out of 15 parties/buyers were arraigned in the show cause notice (SCN) and the statements recorded were not admissible as evidence due to non-compliance with Section 9D of the Central Excise Act. The Tribunal noted that the Note Books did not clearly show details of alleged clandestine manufacture and clearance. The affidavits from 107 parties denying the purchase of goods were also ignored by the revenue. The Tribunal found that the authenticity of the Note Books was not reliable and the evidence presented was insufficient to support the allegations.

Compliance with Section 9D of the Central Excise Act:
The Appellants contended that the statements recorded during the investigation were not admissible as evidence because the mandatory procedure under Section 9D was not followed. The Tribunal agreed, stating that the statements could not be relied upon without proper examination and cross-examination as per Section 9D. The denial of cross-examination without valid grounds rendered the statements legally unsustainable.

Allegation of Clandestine Manufacture and Removal:
The Tribunal observed that the revenue failed to provide positive and tangible evidence to support the charges of clandestine manufacture and removal. There was no evidence of procurement of raw materials, production records, transportation of goods, or unaccounted cash transactions. The Tribunal emphasized that mere entries in private records do not substantiate allegations of clandestine removal without corroborative evidence from independent sources.

Confiscation of Goods Found in the Factory:
The Appellants argued that the seized goods were not liable for confiscation as they were lying within the factory and there was no evidence of an attempt to remove them clandestinely. The Tribunal referred to several precedents, concluding that goods found within the factory premises and not entered in statutory records are not liable for confiscation if there is no evidence of clandestine removal. The Tribunal set aside the confiscation of the goods.

Conclusion:
The Tribunal found that the revenue's case was based on unreliable evidence and non-compliance with legal procedures. The allegations of clandestine manufacture and removal were not substantiated by positive and tangible evidence. The confiscation of goods found in the factory was also deemed unjustified. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential reliefs as per law.