2001 (5) TMI 79 - AT - Central Excise

Summary

Issues involved: Duty demand, penalty imposition, validity of evidence, imposition of penalty u/s 11AC of CEA.

Duty Demand: The appellants were found to have cleared woollen worsted yarn in cones instead of reel hanks, availing an exemption. Statements of buyers were relied upon, but they were not produced for cross-examination. Lack of corroboration and evidence led to the impugned order being based on inadmissible evidence, violating principles of natural justice. The Commissioner's order was set aside due to reliance on unreliable evidence.

Validity of Evidence: The statements of buyers were recorded during investigation but not corroborated by any other evidence. Invoices showed sale of yarn in hanks, not cones. Lack of physical evidence and failure to allow cross-examination rendered the statements inadmissible. The reliance on uncross-examined witness statements was deemed legally unsustainable.

Imposition of Penalty u/s 11AC of CEA: The imposition of penalty under Section 11AC of the Central Excise Act was challenged as the alleged duty evasion period predated the insertion of this section. The retrospective operation of Section 11AC was clarified, stating it was not in effect during the period in question. Citing legal precedent, the Tribunal ruled that the penalty imposition under Section 11AC was not legally sustainable.

Conclusion: The impugned order of the Commissioner was set aside, and the appeal of the appellants was allowed. The lack of admissible evidence, failure to allow cross-examination, and the inapplicability of penalty provisions under Section 11AC led to the decision in favor of the appellants.