2010 (4) TMI 377 - AT - Central Excise

Clandestine removal- The appellants are engaged in manufacture and trading of excisable goods. Statements of some suppliers. Statement that no such goods manufactured by them and trading bills issued without actual supply that assessee was making payments by cheque and after deduction of sales tax etc. and their commission balance returned in cash. Statement also that facility or infrastructure to manufacture impugned goods absent. Statements corroborated by admission of Managing Director. Objection only that cross examination absent rejected as same on account of assessee s failure to take appropriate steps. Held that- many suppliers mere traders in unconnected products. Production suppressed. Merely because one suppliers having business transaction even subsequently not established establish similar transaction during relevant time. Records manipulated to suit intention to evade. No case for interference in impugned order upholding demand and penalty.

Issues Involved:
1. Reliance on uncorroborated statements.
2. Violation of principles of natural justice.
3. Proof of clandestine removal and excess manufacture.
4. Credibility of suppliers and their transactions.
5. Cross-examination of witnesses.
6. Admissibility of statements under Section 9D of the Central Excise Act.
7. Bank transactions and their implications.

Detailed Analysis:

1. Reliance on Uncorroborated Statements:
The appellants argued that the demand was confirmed solely based on uncorroborated statements from certain suppliers and their employees. They contended that these statements should not have been relied upon since the witnesses were not presented for cross-examination. The adjudicating authority, however, found that the statements were corroborated by other evidence and were admissible under Section 9D of the Central Excise Act, 1944.

2. Violation of Principles of Natural Justice:
The appellants claimed a violation of natural justice as they were not given the opportunity to cross-examine the witnesses. However, the Tribunal noted that the appellants themselves did not pursue their right to cross-examine after the witnesses failed to appear. The Tribunal held that the appellants' request to decide the matter without the witnesses' statements implied a waiver of their right to cross-examine.

3. Proof of Clandestine Removal and Excess Manufacture:
The appellants argued there was no proof of excess manufacture or clandestine removal of goods. The Tribunal found that the Managing Director's admission, corroborated by other materials, supported the charge of clandestine removal. Statements from suppliers also indicated that the goods were traded without actual supply, and the appellants manipulated records to evade duty.

4. Credibility of Suppliers and Their Transactions:
The appellants contended that their suppliers were registered with the Sales Tax/VAT department and had paid sales tax, indicating genuine transactions. However, the investigation revealed that many suppliers were either non-existent or involved in unrelated businesses, and some had no infrastructure to manufacture the items. The Tribunal found these findings credible and supportive of the department's case.

5. Cross-Examination of Witnesses:
The Tribunal emphasized that while the right to cross-examine is valuable, it can be waived if not pursued diligently. The appellants did not insist on fresh summons after the witnesses failed to appear, and instead requested the statements be discarded. The Tribunal held that the appellants could not later claim a violation of natural justice on this ground.

6. Admissibility of Statements Under Section 9D of the Central Excise Act:
Section 9D allows statements made before a Central Excise officer to be admissible under certain conditions. The Tribunal cited various judgments, including those from the Delhi and Bombay High Courts, to support the admissibility of such statements even if the witnesses are not cross-examined, provided the statements are corroborated and the witnesses are unavailable for reasons beyond control.

7. Bank Transactions and Their Implications:
The appellants argued that all transactions were through proper banking channels, indicating genuineness. However, the department's evidence showed that suppliers withdrew money in cash and returned it to the appellants after deducting taxes and commissions. This manipulation of records was seen as an attempt to evade duty.

Conclusion:
The Tribunal dismissed the appeals, finding no violation of natural justice and sufficient evidence of clandestine removal and manipulation of records. The adjudicating authority's reliance on the statements and other corroborative evidence was upheld, and the penalties and demands were confirmed. The appeals and applications were dismissed as the findings were borne out from the records and warranted no interference.

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