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2024 (12) TMI 75 - AT - Central ExciseClandestine removal - evasion of Central Excise Duty by diversion of duty paid inputs i.e. imported plastic granules of various grades from Mumbai port to Halol, Ahmedabad, Vadodara, Vapi - non-receipt of the inputs in the factory of the Appellant - shortages of finished goods detected at the time of visit of the officers - denial of Cenvat credit. Evasion of duty - HELD THAT - Inasmuch as in the present case the entire case of the Revenue is based upon the shortages detected at the time of visit of the officers, without there being any other evidence. It is seen that the judicial view is that the stock taking would be conducted in a proper manner and considering all the stock lying in the factory. It cannot be on the basis of eye estimation or otherwise. The Hon ble Gujarat High Court in the matter of COMMR. OF C. EX., CUS. SER. TAX, DAMAN VERSUS NISSAN THERMOWARE P. LTD. 2010 (12) TMI 487 - GUJARAT HIGH COURT , observed that mere statement of the representative of the assessee at the time of stock verification is not sufficient which was retracted subsequently. The confessional statement of an accused in criminal proceedings cannot be put on a par with a statement recorded during preventive checks - In the present case, it is found that Appellant claimed that the said materials were lying at their factory and during the search officers not considered the finished goods available in various sections/sheds, appellant also produced the CCTV footage which was also not considered by both the adjudicating authority and no enquiry was conducted thereon - the shortage found at the time of physical verification is not sustainable and that the allegations in the instant case of clandestine removal of the finished goods is not sustainable Accordingly, demand on this account is set aside. Denial of Cenvat credit of Rs. 72,91,056/- on the allegation that the appellant has availed Cenvat Credit on the strength of invoices issued by M/s. Siddhi Trading Corporation, M/s Eskay-Bee International Pvt. Ltd., M/s. Deluxe Karan Imports Pvt. Ltd. and M/s. Kookey Multi Trading Corporation without receipts of the inputs in their factory - HELD THAT - On perusal of orders we find that the request for cross-examination of the persons whose statements have been relied upon has been turned down on the ground that witnesses did not appear for cross examination. The reasons assigned by the Ld. Adjudicating authority below to reject cross-examination is clearly unsustainable in legal parlance for the obvious reason that no adverse inference can be drawn against assessee whose statements are to be relied by the Revenue without ascertaining the veracity in the absence of cross-examination - In an almost identical situation, this Tribunal in the case of ARSH CASTINGS PVT. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, CHANDIGARH 1995 (9) TMI 156 - CEGAT, NEW DELHI has observed that ' If witness do not turn up for cross-examination, it is open to the adjudicating authority to proceed with the adjudication without relying on these statements against the person so charged. Failure of a witness to appear for cross-examination will not be a ground to penalise the appellants in law when the appellant is entitled to an opportunity of cross-examination of third party on whose statement s reliance is placed.' The statement of persons whose cross-examination was allowed but they do not turn up for cross-examination cannot be relied upon and have to be excluded from evidences. On the basis of said statements no cenvat demand is sustainable. Revenue if chooses not to examine any witnesses in adjudication their statement are not considerable as evidence - the Tribunal in the case of M/S NIDHI AUTO PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA-I 2019 (6) TMI 899 - CESTAT ALLAHABAD , while relying on the ratio laid down by the Hon ble High Court in the case of Parmarth Iron Pvt. Ltd. has held that when the Revenue does not allow cross-examination of any prosecution witness then Revenue cannot rely on the statement given by such prosecution witness for confirmation of demand. In the present matter receipts of the goods in factory clearly established by the Appellant with documentary evidences. Further, the investigation is silent as to how the Appellant-manufacturer, manufactured finished material without receiving the inputs. The law is settled that as long as duty payment is accepted on outputs, the benefit of credit available on input cannot be denied. Therefore, there are no substantial evidences which result the disallowance of credit - the appellant have satisfied the requirement of receipt of inputs along with cenvatable invoices in their factory and accordingly, the Cenvat credit taken by them is in accordance with the scheme of the Act read with Cenvat Credit Rules. The impugned order is set aside - appeal allowed.
Issues Involved:
1. Alleged evasion of Central Excise Duty through diversion of duty-paid inputs and availing Cenvat credit without actual receipt of goods. 2. Alleged clandestine removal of finished goods and corresponding duty evasion. 3. Denial of cross-examination of witnesses relied upon by the department. 4. Reliance on third-party statements without corroborative evidence. 5. Retraction of statements by the appellant's partner and its evidentiary value. Detailed Analysis: 1. Alleged Evasion of Central Excise Duty: The core issue revolves around the allegation that the appellant diverted duty-paid plastic granules and availed Cenvat credit without actual receipt of these inputs. The department's case was primarily based on the shortage of raw materials and finished goods found during a search operation. However, the appellant contested this by arguing that there was no concrete evidence to support the claim that the inputs were not received at their factory premises. The appellant emphasized that the department's allegations were based on assumptions and lacked corroborative evidence. The tribunal noted that mere shortages detected during the search, without additional evidence of clandestine activities, could not substantiate the charges of evasion. The tribunal referenced previous judgments which established that shortages alone do not justify the confirmation of demands for clandestine removal. 2. Alleged Clandestine Removal of Finished Goods: The department confirmed a demand of Rs. 9,93,922/- for shortages in finished goods, which was allegedly admitted by the appellant's partner. The appellant argued that there was no proper documentation or panchnama to verify the physical availability of goods, and the CCTV footage was not considered. The tribunal found that the department failed to provide additional evidence beyond the shortages to support the claim of clandestine removal. The tribunal highlighted that the retraction of statements by the appellant's partner and the absence of a thorough investigation into the goods' availability undermined the department's case. Consequently, the tribunal set aside the demand related to the alleged clandestine removal. 3. Denial of Cross-Examination: A significant procedural issue was the denial of cross-examination of witnesses whose statements were relied upon by the department. The appellant's request for cross-examination was only partially granted, with several key witnesses not appearing. The tribunal emphasized the principle of natural justice, stating that reliance on third-party statements without allowing cross-examination is unsustainable. The tribunal cited previous cases where the absence of cross-examination led to the exclusion of such statements as evidence. The tribunal concluded that the statements of witnesses who were not cross-examined could not be relied upon to confirm the demand. 4. Reliance on Third-Party Statements: The appellant argued that the department's reliance on statements from transporters and other third parties was not supported by corroborative evidence. The tribunal agreed, noting that the statements lacked evidentiary value without cross-examination and additional supporting evidence. The tribunal reiterated that demands based solely on third-party statements, without corroboration, are not sustainable. 5. Retraction of Statements: The appellant's partner had retracted his statements made during the investigation, arguing that they lacked evidentiary value. The tribunal acknowledged the retraction and noted that retracted statements, especially when not corroborated by other evidence, hold little weight. The tribunal found that the department failed to provide substantial evidence to counter the retraction and support their allegations. Conclusion: The tribunal set aside the impugned order, concluding that the department failed to provide sufficient evidence to substantiate the allegations of evasion and clandestine removal. The appeal was allowed, with consequential relief granted to the appellant.
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