2009 (4) TMI 282 - AT - Central Excise

The original authority had passed the order in violation of principles of natural justice - It was incumbent on him to have allowed the request for cross-examination of witnesses whose statements had been relied on in passing the order. Charge of clandestine removal Statement of staff of third party are not reliable without material corroboration False account in records of transporter in absence of necessity of such records, identification of prsons who maintained them and their cross-examination, reliance on such records rejected - the Department could not identify and obtain a statement from the person who maintained the register of the transport company showing transport of raw material to the respondents. As these witnesses were not allowed to be cross-examined by the respondents their depositions could not have been relied on by the original authority. We find that in the instant case Revenue could not produce any evidence for receipt of the raw material and sale of the clandestinely cleared goods. There is no evidence of receipt of cash against unaccounted clearances. There was no attempt to ascertain any discrepancy in the stock of raw material or finished goods at the premises of the respondents. Held that the finding of clandestine removal is based on assumption and presumption. revenue s appeal dismissed

Summary

Issues:
1. Alleged clandestine removal of goods without duty payment.
2. Reliability of evidence based on third-party statements.
3. Validity of penalties imposed under Central Excise Rules.
4. Admissibility of retracted statements as evidence.
5. Principles of natural justice regarding cross-examination.
6. Requirement of tangible evidence in proving clandestine removal.

Analysis:

1. Alleged Clandestine Removal:
The case involved M/s. R.V. Steels Pvt. Ltd. being accused of clandestinely clearing ingots manufactured from imported scrap without accounting for the raw material. The original authority imposed duty and penalties, which were later set aside by the Commissioner (Appeals) based on lack of substantial evidence beyond third-party statements.

2. Reliability of Third-Party Statements:
The Commissioner (Appeals) emphasized that relying solely on statements of third parties without other corroborating evidence was not legally sustainable. The need for credible corroboration, such as establishing the source of procurement and sales transactions, was highlighted to substantiate charges of clandestine removal.

3. Validity of Penalties:
Penalties under Rule 173Q of the Central Excise Rules, 1944, and Rule 209A of CER were imposed on the entities involved. However, the appellate authority found the penalties not justifiable due to the lack of concrete evidence and procedural irregularities, leading to the penalties being set aside.

4. Admissibility of Retracted Statements:
The Revenue contended that retracted statements should be considered valid evidence, but the appellate authorities disagreed, emphasizing the timing and circumstances of the retractions. The need for consistent and reliable evidence was underscored in determining the culpability of the accused parties.

5. Principles of Natural Justice:
The appellate tribunal highlighted the violation of principles of natural justice by the original authority for not allowing cross-examination of witnesses whose statements were pivotal in the case. The right to cross-examine witnesses was deemed essential for a fair adjudication process.

6. Requirement of Tangible Evidence:
The tribunal stressed the necessity of tangible evidence, such as proof of raw material receipt, production capacity, and sales transactions, to substantiate charges of clandestine removal. Merely relying on assumptions and presumptions without concrete evidence was deemed insufficient to establish guilt.

In conclusion, the appellate tribunal dismissed the Revenue's appeal, affirming the Commissioner (Appeals)'s decision to vacate the demand and penalties. The judgment underscored the importance of credible evidence, adherence to procedural fairness, and the need for tangible proof in establishing allegations of clandestine removal in excise matters.