2002 (11) TMI 91 - SC - Central Excise

Whether the appellants have manufactured and cleared 1,61,122 kgs of tread rubber and removed the same without payment of central excise duty? Held that - The Collector in the adjudication proceedings has relied very strongly on the evidence produced by the Department to show that the appellant firm had in fact purchased carbon black from M/s. Universal Agencies as per the 82 invoices recovered by the Investigating Agency. He also relied upon the so-called statement made by Shri Sunny P. Kunnath to the Investigating Officer that out of the 82 invoices 62 invoices which even though did not show the name of Shalimar Rubber Industries, the appellants herein under the said fictitious invoices did purchase huge quantity of carbon black from M/s. Universal Agencies. As noticed above, this witness was not examined by the Collector in the proceedings. Consequently, he could not be subjected to a cross-examination. In that background it becomes extremely difficult to place reliance on the so-called statement made by Shri Sunny P. Kunnath to the Inspector which according to the evidence of the Inspector himself made before the Magistrate was not recorded. On the basis of such evidence, in our opinion, it is not possible to come to the conclusion that there was such a clandestine purchase of carbon black from M/s. Universal Agencies. Thus if we exclude this vital material as to the clandestine purchase of carbon black from M/s. Universal Agencies by the appellant, in our opinion, the foundation of the department s case fails. In favour of assessee.

Summary

Issues:
- Contravention of provisions of Section 6 of the Central Excise Tariff Act and related Rules
- Reliance on evidence from M/s. Universal Agencies partner
- Failure to produce witness for cross-examination
- Rejection of letter denying purchase of carbon black
- Criminal proceedings initiated against the appellants

Analysis:
1. The judgment dealt with the contravention of the provisions of Section 6 of the Central Excise Tariff Act and related Rules by the appellants. The Collector of Central Excise imposed penalties on the appellants for manufacturing and clearing tread rubber without paying central excise duty and for not maintaining required stock registers. The Tribunal confirmed the Collector's order, leading to the appellants appealing to the Supreme Court.

2. The case revolved around the reliance on evidence provided by a partner of M/s. Universal Agencies, specifically related to the purchase of carbon black by the appellant firm. The Department's case was based on the assumption that the quantity of carbon black purchased indicated excess production by the appellants. The Collector and the Tribunal heavily relied on this evidence to establish the charges against the appellants.

3. The appellants argued that the Department failed to produce the witness for cross-examination, questioning the validity of the evidence provided. They contended that the case against them rested solely on this evidence and emphasized the importance of cross-examination to establish the credibility of the witness's statements.

4. Another crucial aspect was the rejection of a letter denying the purchase of carbon black by the appellant firm. The letter, dated June 22, 1987, from M/s. Universal Agencies contradicted the claims made based on the partner's statements. The appellants highlighted this discrepancy to challenge the Department's case against them.

5. Additionally, criminal proceedings were initiated against the appellants under specific sections of the Act. The appellants argued that the Department's case lacked substantial evidence and pointed out the rejection of the same evidence in the criminal proceedings, which resulted in an order of discharge.

6. After a detailed analysis of the evidence and arguments presented, the Supreme Court concluded that excluding the crucial evidence regarding the alleged clandestine purchase of carbon black from M/s. Universal Agencies by the appellants, the foundation of the Department's case collapsed. As a result, the Court allowed the appeals, quashing the impugned orders and ruling in favor of the appellants.