2024 (10) TMI 622 - AT - Central Excise

Clandestine Removal - retraction of affidavits and statements - reliance placed on statements of transporter - absence of corroborative evidence supporting illicit manufacture - It has been contended that no demand of Central Excise Duty could be made without a source document, particularly only on the basis of a data entry worksheet prepared in a tabular form on a computer, in absence of required certificate u/s 36B of Central Excise Act, 1944 - HELD THAT - It is found from the impugned order that M/s Patel Product in their reply to the SCN filed before the adjudicating authority, had submitted copies of retraction affidavits of the persons, whose statements were recorded under summons during the course of investigation of the present dispute. The department had also conducted an enquiry into the retracted affidavits, the fact of which is evident from the available case records. The department had called for the information about the authenticity and veracity of the stamp papers from the Collector of Stamps (stamp paper issuing authority), Thane, in context with the officially recorded dates, on which the stamp papers were issued by them; the name of the stamp vendor to whom they were issued; the date of subsequent sale by the stamp vendor and the name of the person to whom such stamps were ultimately sold for actual use by the stamp vendor etc. In the present case, the facts are not under dispute that the retracted affidavits are completely ignored and not taken into consideration, then in that case, what remains for consideration is mere confessional statements. It is a settled principle of law that demand cannot be sustained, based on stand-alone confessional statements, in the absence of corroborative evidences. When the officers of the Central Excise Department had failed to carry out any investigation at the end of raw material suppliers and were also unable to have brought out any independent evidence to prove that printed plastic pouches of Om Special Pandharpuri Tambakoo No. 1 were procured surreptitiously for the purpose of packing the said branded tobacco, it cannot be said that the department has made out a case against the appellants, alleging involvement in the fraudulent activity of clandestine removal of excisable goods. Thus, placing reliance only on the confessional statements, without proper corroboration with the documentary evidences cannot be considered as valid or justified action, which would suffice to prove the charges of clandestine removal of excisable goods. This Tribunal, in the case of JEEN BHAVANI INTERNATIONAL AND MAHESH CHANDRA SHARMA KARTA VERSUS COMMISSIONER OF CUSTOMS- NHAVA SHEVA-III 2022 (8) TMI 237 - CESTAT MUMBAI , has held that in a case, where statement recorded by the officers of the department are not provided to the respective person at that very moment and that the same are provided only along with the SCN, in that case, the only opportunity which the deposer of the statement would get for the purpose of retracting the statement is only after the issuance of SCN, when he is handed over with the said statement. In such a case, the Tribunal has held that if a retraction affidavit is made after the issuance of SCN, then the said retraction would be considered as a valid retraction. During the course of investigation, statements of the packing labourer and labour supervisor of Unit III of M/s. Patel Product, Kurla, were recorded and relied upon in the adjudication order. On that basis, the adjudicating authority has observed that Om Special Pandharpuri Tambakoo No. 1 was produced in excess, and were removed outside the premises in a clandestine manner. It is an admitted position that the appellants had requested the adjudicating authority for affording cross examination of the said labour supervisor and packing labourer. However, the same was denied. Under such circumstances, in terms of Section 9D ibid, such statements have lost their evidential value and cannot be relied upon in isolation, without any further documentary evidence for confirmation of the adjudged demands. Further, the allegation of clandestine manufacture and clearance of excisable goods is a serious charge, and the burden to prove such charge is entirely lies with the Revenue - the Revenue has not brought on any substantial evidence to prove such allegation levelled against the appellants. The charges of clandestine clearance of branded tobacco, as levelled against the appellant M/s. Patel Product cannot be sustained inasmuch as Revenue has not brought out any substantial documentary evidences to prove such charges. Therefore, the adjudged demands confirmed on the appellant M/s. Patel Product fails and consequently, the penalties imposed on the other appellants in the impugned order cannot be sustained. There are no merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellants. Therefore, the impugned order is set aside - appeal allowed.

Summary

Issues Involved:

1. Allegations of clandestine removal of excisable goods.
2. Authenticity and admissibility of retracted affidavits and statements.
3. Application of Central Excise Valuation Rules.
4. Demand for Central Excise Duty based on alleged undervaluation.
5. Joint and several liability for duty among separate registered units.
6. Procedural lapses in investigation and adjudication.

Detailed Analysis:

1. Allegations of Clandestine Removal of Excisable Goods:

The core issue revolves around the alleged clandestine removal of 'Om Special Pandharpuri Tambakoo No. 1' by M/s Patel Product. The department alleged that 50-75 bags of Grade-I quality tobacco were diverted from M/s Shree M.C. Patel & Sons and M/s Shree Krishna Traders to M/s Patel Product for suppressed production and clandestine clearance. The Show Cause Notice (SCN) calculated the assessable value of clandestinely cleared goods as Rs. 58,46,35,230/-, with a total Central Excise Duty demand of Rs. 31,11,78,562/-. However, the tribunal found that the department failed to substantiate these allegations with substantial evidence, particularly regarding the procurement of packing materials and the quality of tobacco used.

2. Authenticity and Admissibility of Retracted Affidavits and Statements:

The tribunal examined the authenticity of retracted affidavits submitted by individuals whose statements were recorded during the investigation. The department contended that these affidavits were backdated and forged, based on discrepancies in stamp paper issuance and notarization. However, the tribunal noted procedural lapses, such as the failure to provide copies of statements to the concerned individuals immediately, which hindered timely retraction. The tribunal emphasized the necessity of corroborative evidence beyond mere confessional statements, which the department failed to provide.

3. Application of Central Excise Valuation Rules:

The department applied the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, to determine the assessable value based on the price at which M/s Jalaram Traders and M/s Gajanan Agency sold the goods in the open market. The tribunal found that the application of Valuation Rules was inappropriate, as there was no evidence of related party transactions affecting the price. The tribunal highlighted that the transaction value should be determined under Section 4 of the Central Excise Act, 1944, and the department failed to establish the related party concept.

4. Demand for Central Excise Duty Based on Alleged Undervaluation:

The SCN alleged undervaluation of Rs. 3,67,06,613/- due to transactions between related parties. The tribunal found that the department did not demonstrate that the price was not the sole consideration for the sale. The tribunal also noted that the appellants provided evidence of sales to unrelated buyers at similar or lower prices, undermining the undervaluation claim.

5. Joint and Several Liability for Duty Among Separate Registered Units:

The SCN proposed joint and several liability for duty among the four units of M/s Patel Product, each registered separately under Central Excise Law. The tribunal held that duty can only be demanded from the specific manufacturer of the goods, and the concept of joint and several liability was not applicable. The tribunal emphasized that each unit operated independently, with separate registration numbers and statutory returns.

6. Procedural Lapses in Investigation and Adjudication:

The tribunal identified several procedural lapses, including the denial of cross-examination requests for key witnesses and the reliance on worksheets lacking certification under Section 36B of the Central Excise Act. The tribunal underscored the importance of adhering to procedural safeguards, such as providing copies of statements promptly and allowing cross-examination, to ensure fair adjudication.

Conclusion:

The tribunal set aside the impugned order, finding no merit in the adjudged demands due to the lack of substantial documentary evidence and procedural deficiencies. Consequently, the appeals were allowed in favor of all appellants, and the penalties imposed were deemed unsustainable.