2004 (2) TMI 155 - AT - Central Excise

Clandestine manufacture and removal of paper mainly on the basis of documents seized - excess stock found in the factory - demand of duty - imposition of penalty - Onus of proof - statements of the transporters - Cross-examination of witnesses and reliability of evidence - Accountal of goods - HELD THAT - It has also been held by the Tribunal in the case of Kothari Synthetics Industries v. CCE Jaipur 2002 (9) TMI 182 - CEGAT NEW DELHI that entries made in the transport Register of the transport company could not be accepted as a conclusive proof of clandestine receipt of goods from that transport company for want of corroboration from any tangible evidence. Following the ratio of these decision the duty demand cannot be upheld solely on the basis of uncorroborated statements and records of transporter. The statements tendered by the labourers can also not be relied upon by the Revenue as these persons were not produced for being cross-examined. Moreover there is no corroboration of their statements with regard to the Trucks by which the goods were allegedly removed or the persons who received the goods. The Truck driver Shri Shiv Bahadur Yadav has also not been cross-examined and cleaner Shri Rakesh Kumar had deposed that the Bills/Invoices are supposed to be with the Driver and he being cleaner had no knowledge. Duty in respect of 149 consignments - The onus of proof that the goods were removed by the Appellants without payment of duty and without entering the same in their records is upon the Revenue which cannot be discharged merely on the strength of the entries made in the records of a third party without linking the removal of goods from the premises of the Appellant-company. The mere fact that the Appellant-company had business relation with Chitra Traders does not mean that they will be liable to each and every entry made by Chitra Traders in their books of account. It is also noted that none of the transporters and none of the labourers whose statements have been relied upon by Revenue have mentioned that the goods in question were delivered to Chitra Traders from the premises of the Appellants. The material brought on record may at the most create a doubt only. But doubt cannot take the place of evidence. The Revenue has thus not proved its case against the Appellants in respect of 149 consignments. We therefore set aside the demand of duty and penalty imposed on Appellant-company and consequently the demand of interest. Excess stock found in the factory is concerned the same is liable to confiscation as it was not entered in the books of account. No material has been produced by the Appellants in support of their contention that part of the goods were manufactured on the day of seizure and remaining goods were not of good quality. No such assertion about quantity was also made by Manoj Sharma in his statement dated 22-6-2001 when the goods were seized by the officers. We however reduce the redemption fine from Rs. One lakh to Rs. 50, 000/- and penalty from Rs. 50, 000/- to Rs. 15, 000/- on this count. As penalty has been imposed on Appellant-company on account of excess goods found unaccounted there is no need to impose separate penalty on Director and Authorised Signatory under Rule 209A of the Central Excise Rules 1944. We therefore set aside the penalty imposed on Appellant Nos. 2 and 3. All the appeals are disposed of in the above manner.

Summary

Issues Involved:
1. Clandestine removal of excisable goods.
2. Demand of duty and imposition of penalty.
3. Confiscation of excess stock found in the factory.
4. Cross-examination of witnesses and reliability of evidence.

Summary:

1. Clandestine Removal of Excisable Goods:
The main issue against the appellants was the alleged clandestine removal of 966.259 MT of excisable goods to M/s. Chitra Traders without payment of duty, based on the books of account resumed from Chitra Traders. The appellants argued that the records from Chitra Traders were manipulated and unreliable. They emphasized that duty cannot be demanded solely on the basis of third-party account books without corroborative evidence. The Tribunal noted that the statements of various witnesses were not corroborated and that the liability cannot be fastened on an assessee based on documents seized from a third party without tangible evidence.

2. Demand of Duty and Imposition of Penalty:
The appellants contended that the demand of duty and imposition of penalties were unjustified as the evidence was based on uncorroborated and uncross-examined statements. They cited several precedents where reliance on such evidence was deemed insufficient for sustaining a demand. The Tribunal agreed, noting that the Revenue failed to provide corroborative evidence linking the removal of goods from the appellants' premises to the alleged clandestine transactions. Consequently, the demand of duty and penalties imposed on the appellant-company were set aside.

3. Confiscation of Excess Stock Found in the Factory:
Regarding the excess stock of 39.681 MT found in the factory, the Tribunal held that the goods were liable to confiscation as they were not entered in the books of account. The appellants' claim that part of the goods were manufactured on the day of seizure and the remaining were non-marketable was not substantiated with evidence. The Tribunal reduced the redemption fine from Rs. 1 lakh to Rs. 50,000/- and the penalty from Rs. 50,000/- to Rs. 15,000/-.

4. Cross-Examination of Witnesses and Reliability of Evidence:
The appellants argued that the statements of witnesses who were not produced for cross-examination could not be relied upon. The Tribunal concurred, emphasizing that the statements of witnesses without cross-examination and corroboration cannot be the basis for holding allegations against the assessee. The Tribunal cited multiple precedents supporting this view and concluded that the Revenue's case was not proved beyond doubt.

Conclusion:
The Tribunal set aside the demand of duty and penalties imposed on the appellant-company due to lack of corroborative evidence and reliance on uncorroborated statements. The confiscation of excess stock was upheld, but the penalties were reduced. Penalties on individual appellants were also set aside.