2008 (2) TMI 133 - HC - Central Excise

Photo copy of the invoices provided by the informer to the dept. were not supported by any material & during the search by the officers of the dept. in the factory office residential premises of the Director and the authorized signatory no incriminating documents were found moreover assessee has also reversed the credit on the shortage of inputs detected during the stock verification - demand & penalty on ground of clandestine removal on the basis of the said invoices is not sustainable

Summary

Issues:
1. Cross-examination denial impact on demand of parallel invoices and GRs.
2. Justification of electricity consumption evidence in show cause notice.
3. Legitimacy of retraction of statement by authorized signatory.

Issue 1 - Cross-examination Impact:
The Department of Central Excise filed an appeal questioning the denial of cross-examination of the Government examiner regarding 220 parallel invoices and 16 GRs. The Tribunal found that the denial did not prejudice the case as the issuance and clearance of these documents were accepted by the authorized signatory and the Director. The Tribunal emphasized the lack of independent evidence supporting the alleged clandestine removal, leading to the demand being dropped.

Issue 2 - Electricity Consumption Evidence:
The Department alleged abnormal electricity consumption by the respondent based on scrutiny of electricity bills and production records. However, the Tribunal questioned the sufficiency of evidence in the show cause notice. It found that no substantial material was disclosed to establish the consumption of electricity, leading to doubts about the validity of the department's claim.

Issue 3 - Retraction of Statement:
The retraction of the statement by the authorized signatory raised concerns about its legal validity. The Tribunal noted the absence of evidence indicating coercion or influence on the signatory. Additionally, the retraction, endorsed as correct by the Director, was considered significant. The Tribunal concluded that the retracted statement could not be the sole basis for imposing duty and penalty, especially when no incriminating evidence was found during searches.

The respondent, engaged in manufacturing steel ingots, faced allegations of clandestine removal leading to duty demand. Despite the Commissioner's order confirming the duty demand, the Tribunal overturned it. The Tribunal highlighted the lack of concrete evidence supporting the allegations, such as independent verification of invoices and production-related activities. The retracted statement and absence of incriminating findings during searches further weakened the department's case. Ultimately, the Tribunal ruled in favor of the respondent, emphasizing the insufficiency of evidence and the retraction of the statement as crucial factors in quashing the duty demand and penalty imposition.