2004 (10) TMI 225 - AT - Central Excise

Clandestine removal and manufacture - Undervaluation - benefit of small scale exemption under Notification No. 9/2001-C.E. - Admissibility and reliability of retracted statements - Shortage of MS Ingots - Demand - Penalty - No material to show the purchase of raw materials - sale and transport of the alleged finished goods - non-availability of work force to produce such a huge quantity of ingots and the production capacity of their induction furnace - HELD THAT - In the present matter no statement of any supplier of raw material appears to have ever been recorded as there is no such statement on record. Under the law the retracted statement is required to be corroborated in material facts. No such corroboration has been brought on record. We observe that the search proceeding in Devika Chambers was conducted in the presence of one D.K. Singh. It is also mentioned in the Panchnama that when officers and Panchas entered the premises of 301 Devika Chambers they came across one person who told his name as Shri D.K. Singh. Surprisingly the statement of the said D.K. Singh could have thrown light as to who was possessing the said premises and for whom he was working in that premises. There is also nothing on record to show that as to who is the owner of said premises whether these are owned by the Appellant-Company/any of its director or any members of their families or they have taken the said premises on rent. In absence of any such material brought on record it cannot be claimed by Revenue merely on the basis of Sunil Garg s statement alone; that too retracted statement that Devika Chambers was the office premises of the Appellants. We observe that even the statement of Manoj Kumar whom as per the statement of driver Shri Arun Kumar used to return the bills after delivery of the goods. We thus hold that Revenue has not proved the case of clandestine manufacture and removal of goods by the Appellants. Consequently the demand of duty on account of clandestine removal and undervaluation is set aside. Demand of duty on account of shortage of M.S. Ingots in the factory premises is concerned the Appellants have not made any submission. In fact the learned Advocate has not challenged the said demand of duty. Accordingly we uphold the demand of duty amounting to Rs. 1, 59, 206/-. Penalty on the appellant-company is also reduced to Rs. 20, 000/-. Penalties imposed on other appellants are set aside as the charge of clandestine manufacture and clearance has not been upheld against the appellant-company itself. All the appeals are disposed of in these terms.

Summary

Issues Involved:
1. Alleged clandestine manufacture and removal of excisable goods.
2. Validity and relevance of documents seized from 301, Devika Chambers.
3. Admissibility of retracted statements.
4. Corroborative evidence for the charge of clandestine removal.
5. Demand of duty on account of undervaluation and shortage of MS Ingots.

Summary:

1. Alleged clandestine manufacture and removal of excisable goods:
The main issue was whether the appellants manufactured excisable goods clandestinely and removed them without discharging the duty liability. The Tribunal found that the Revenue failed to establish the clandestine manufacture and removal of goods by the appellants.

2. Validity and relevance of documents seized from 301, Devika Chambers:
The appellants argued that 301, Devika Chambers was not their premises and that the documents seized from there did not pertain to them. The Tribunal noted that the Revenue did not provide sufficient evidence to prove that Devika Chambers was the office premises of the appellants. The Tribunal also observed that the retraction of the statement by Sunil Garg was immediate and not an afterthought, supported by medical reports and postal receipts.

3. Admissibility of retracted statements:
The Tribunal held that the retracted statement of Sunil Garg, which was made under duress, could not be solely relied upon without corroborative evidence. The Tribunal emphasized that under the law, a retracted statement requires corroboration in material facts, which the Revenue failed to provide.

4. Corroborative evidence for the charge of clandestine removal:
The Tribunal found that the Revenue did not bring on record any material evidence such as purchase of raw materials, transport details, sale of finished goods, or the manpower required for such production. The Tribunal referred to several decisions where charges of clandestine removal were not upheld due to lack of corroborative evidence.

5. Demand of duty on account of undervaluation and shortage of MS Ingots:
The Tribunal set aside the demand of duty on account of clandestine removal and undervaluation due to lack of evidence. However, the appellants did not contest the demand of duty amounting to Rs. 1,59,206/- towards the shortage of MS Ingots found in the factory premises, which was upheld. The penalty on the appellant-company was reduced to Rs. 20,000/-, and penalties on other appellants were set aside.

Conclusion:
The Tribunal concluded that the Revenue failed to prove the case of clandestine manufacture and removal of goods by the appellants. The demand of duty on account of clandestine removal and undervaluation was set aside, while the demand related to the shortage of MS Ingots was upheld. Penalties were adjusted accordingly.