2005 (4) TMI 159 - AT - Central Excise

Clandestine manufacture and removal of the goods - without payment of duty - Manufacture of Gutka and Pan Masala - Proof - Evidence - Cross-examination - receipt of raw material/pouches - HELD THAT - The details of numbers of the GR Book, dates, numbers of railway receipts, names of consignees and of the consignors are no doubt recorded in these copies, but no investigation had been carried out to verify the correctness of the same. No copies of the Railway Receipts had been also brought on record. Shri Sitaram Suri, Railway Booking Agent, was not even tendered for cross-examination from whom the statement pertaining to the booking of the goods was seized. Therefore, this entire evidence did not help the Revenue for proving the charge of clandestine manufacture and clearance of the goods by the appellants during the period in dispute. We thus find that the adjudicating authority has, in fact, confirmed the duty demand and imposed penalties against the appellants only by drawing inferences and placing reliance on inadmissible, inadequate evidence, discussed. Therefore, the impugned order, in our view, cannot be sustained. The ratio of the law laid down in the case of K.I. Pavunny v. CCE, 1997 (2) TMI 97 - SUPREME COURT and Gobind Lal v. CCE, 1999 (8) TMI 391 - CEGAT, NEW DELHI by the learned SDR, regarding the probative value of the retracted confession by the accused/party is not attracted to the facts of the present case, discussed above. Similarly, the observations in the case of Siemens Ltd. v. CCE 1993 (8) TMI 193 - CEGAT, CALCUTTA referred to by the learned SDR, that appropriate inference can be drawn from circumstantial evidence and conduct of the party and other material factors, as direct evidence in clandestine removal is seldom available, is of no help to the Revenue. In the present case, even from the evidence brought on the record and referred to above, no such inference can be drawn that the appellants had indulged in the clandestine manufacture and removal of the goods without payment of duty during the period in dispute. Similarly, the observations of the Tribunal in the case of Bute Cosmetics v. CCE, Trichy 2000 (5) TMI 639 - CEGAT, CHENNAI and Columbia Electronics Ltd. v. CCE 2002 (3) TMI 108 - CEGAT, NEW DELHI referred by learned SDR, that absence of the receipt of the raw material is not enough to conclude that there was no clandestine removal of the goods, are not attracted to the present case, in the light of the discussion made above. Consequently, the impugned order-in-appeal is set aside against all the appellants in toto. The appeals of the appellants are allowed with consequential relief, if any, permissible under the law.

Summary

Issues Involved:
1. Allegations of clandestine manufacture and removal of goods.
2. Admissibility and reliability of evidence.
3. Cross-examination of witnesses.
4. Sufficiency of evidence to prove clandestine activities.
5. Evaluation of documentary evidence.

Issue-wise Detailed Analysis:

1. Allegations of Clandestine Manufacture and Removal of Goods:
The appellants were accused of clandestine manufacture and removal of Gutka and Pan Masala from January 2001 to September 2001. The Central Excise Officers conducted a raid and seized documents, raw materials, and unaccounted pouches, suggesting clandestine activities. The company was also linked to a franchise agreement and sales depot activities that allegedly revealed clandestine removal of goods.

2. Admissibility and Reliability of Evidence:
The appellants contended that the evidence relied upon by the adjudicating authority was inadmissible and inconclusive. They argued that the impugned order was based on assumptions and presumptions. The statements of witnesses who did not turn up for cross-examination were deemed inadmissible. The Tribunal cited precedents where testimony recorded at the back of a party without cross-examination could not be legally used against that party.

3. Cross-examination of Witnesses:
The Tribunal emphasized the importance of cross-examination to test the veracity of witnesses. Statements from various witnesses, including Shri Arvind S. Rane and Shri Sanjay Gopal Sarode, were deemed inadmissible as they were not cross-examined. Similarly, the cross-examination of Shri Shanker Jhunjhunwala, who denied supplying raw materials clandestinely, was ignored by the adjudicating authority, which was a legal error.

4. Sufficiency of Evidence to Prove Clandestine Activities:
The Tribunal found no tangible evidence to prove the clandestine procurement of raw materials or the manufacture and removal of Gutka. The evidence provided by the Revenue was deemed inconclusive and insufficient. Statements from various individuals, including Shri Sanjay Shah and Shri Suresh N. Soni, were retracted during cross-examination, and the Tribunal held that their initial statements could not be solely relied upon.

5. Evaluation of Documentary Evidence:
The Tribunal scrutinized various documents, including ledger accounts, pages from files, and statements from employees. It found that the documents lacked corroborative evidence to support the allegations. Entries in the documents did not conclusively indicate clandestine activities. The Tribunal also noted that the adjudicating authority misinterpreted evidence and relied on inadmissible and inadequate evidence.

Conclusion:
The Tribunal set aside the impugned order-in-appeal against all appellants, allowing their appeals with consequential relief. The judgment highlighted the necessity of admissible and corroborative evidence, proper cross-examination of witnesses, and the insufficiency of assumptions and presumptions in proving clandestine activities.