2005 (9) TMI 179 - AT - Central Excise

Clandestine removal - Shortage of goods - demand raised on the basis of unsigned slips - reliability of statement which were not signed by any Central Excise Officer who recorded the statement - retraction of statements - HELD THAT - The contention is that Shri Rana never retracted his statement therefore the facts mentioned in the statement regarding the slips can be made basis for demand which shows the actual production of the ingots which is not reflected in the RG-1 record. In respect of the goods found short in the factory the contention is that no objection was raised now the appellant cannot challenge the correctness of that. The Revenue relied upon the decision of the Tribunal in the case of MAJESTIC AUTO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE GHAZIABAD 2004 (7) TMI 136 - CESTAT NEW DELHI . In this case the demand was raised on the basis of certain loose slips recovered from Shri D.K. Rana who is not the employee of the appellant and is working under the labour contractor. From the statement as on record it is clear that it is not signed by any Central Excise Officer. This fact is also clear from the order passed by the Judicial Magistrate whereby the proceedings were dropped. It is found that the Tribunal in the case of DM GEARS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE DELHI-I 2002 (1) TMI 126 - CEGAT COURT NO. II NEW DELHI after considering the relevant provisions of the Section 14 of Central Excise Act is relevant that the adjudicating authority on Chose statement of workers which did not bear the signatures and did not disclose the identity of Central Excise Officer who recorded such statements cannot be sustained. In the present case signature of the Central Excise Officer who recorded statement is not there. In view of the above decision of the Tribunal such statements cannot be relied upon for confirming the demand. The loose slips which were recorded from Shri D.K. Rana were not signed by anybody the signatures were obtained by the Revenue on 5-12-91 at the time of recovery therefore the finding of the Commissioner in the impugned order that slips were signed by Rana is also not sustainable. In the present case certain weighment has been arrived on average basis therefore the shortage arrived at without physical weighment and only on average basis is not sustainable. The impugned order set aside - appeal allowed.

Summary

Issues:
1. Appeal against Order-in-Appeal passed by Commissioner (Appeals) regarding demand for duty based on recovery of loose papers.
2. Reliability of unsigned slips recovered from an employee of a contractor.
3. Admissibility of statements not signed by a Central Excise Officer.
4. Demand based on average basis for shortages in factory production.

Analysis:
1. The appeal was filed against the Order-in-Appeal passed by the Commissioner (Appeals) regarding the demand for duty following the recovery of loose papers showing discrepancies in production records. The adjudicating authority initially dropped the demand, citing unsigned slips and the employee not being directly associated with the appellant firm. However, the Commissioner (Appeals) set aside the order and confirmed the demand.

2. The appellant contended that the employee in question was not directly employed by them but worked for a labor contractor. They argued that the slips forming the basis of the demand were unsigned and incorrectly attributed to the employee. The appellant emphasized that statements not signed by a Central Excise Officer, as per Section 14 of the Central Excise Act, cannot be relied upon to raise a demand. They referenced a previous tribunal decision to support their stance.

3. The Revenue's position was that the employee did not retract his statement, which indicated discrepancies in production figures. They argued that the employee's statement, though not signed by an excise officer, could be used as the basis for the demand. The Revenue also highlighted the inability of the appellant's director to explain the production differences. However, the Tribunal ruled that statements not signed by a Central Excise Officer cannot be relied upon, as per relevant provisions, and cited precedents to support this decision.

4. Regarding shortages found in the factory, the appellant argued that the estimation was based on an average and not actual weighment. They referenced a Panchnama prepared during verification to support their claim. The Tribunal agreed with the appellant, noting that shortages determined solely on an average basis without physical weighment were not sustainable. The decision was influenced by a precedent where the correctness of accounting methods was upheld due to lack of challenge during verification, which differed from the present case's circumstances.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the importance of adherence to legal requirements and proper evidentiary standards in determining duty demands and shortages in factory production.