1998 (5) TMI 211 - AT - Central Excise

Summary

Issues Involved:
1. Duty demand and penalty imposition.
2. Allegations of clandestine removal of LPG cylinders.
3. Credibility of witness statements and lack of cross-examination.
4. Evidence of receipt of raw materials for illicit manufacture.
5. Reliability of barrier records (Municipal, Sales Tax, Police).

Detailed Analysis:

1. Duty Demand and Penalty Imposition:
The appeal challenges the order dated 8-3-1995 by the Collector of Central Excise, Chandigarh, confirming a duty demand of Rs. 12,27,194.97 for the period December 1988 to March 1992 and imposing a penalty of Rs. 4 lac on the appellants.

2. Allegations of Clandestine Removal of LPG Cylinders:
The appellants, engaged in the manufacture of LPG cylinders, were implicated based on the seizure of 822 cylinders from a residential house and statements from various individuals. The Department alleged that the appellants removed 53 truckloads of cylinders without excise documents. The appellants contested these allegations, arguing that the seized cylinders did not belong to them and pointing out contradictions in witness statements.

3. Credibility of Witness Statements and Lack of Cross-Examination:
The appellants argued that the statements from witnesses, including an ex-employee with potential bias and truck drivers, were unreliable and contested without the opportunity for cross-examination. The Collector did not provide the appellants the chance to cross-examine witnesses, which was a significant point of contention. The Department countered that the appellants did not press for cross-examination during personal hearings.

4. Evidence of Receipt of Raw Materials for Illicit Manufacture:
The Department claimed that the appellants received large amounts of sheets illegally, correlating with the number of cylinders allegedly produced clandestinely. However, the appellants argued that the material evidence was insufficient, noting discrepancies in the statements about the receipt and use of raw materials. The Department failed to substantiate the receipt of 296 MT LPG sheets required for the alleged production of 14,800 cylinders, presenting only evidence of 52.690 MT intended for footrings.

5. Reliability of Barrier Records (Municipal, Sales Tax, Police):
The case relied heavily on entries from Municipal, Sales Tax, and Police barriers, which recorded vehicle movements. The appellants contended that these entries, based on oral declarations, could not conclusively prove the transportation of cylinders. The Department argued that these records supported the allegations, but the Tribunal noted that the entries did not consistently show the transportation of 400 cylinders per trip.

Conclusion:
The Tribunal found significant deficiencies in the Department's case, including the lack of concrete evidence on raw material receipt, untested witness statements, and unreliable barrier records. Consequently, the Tribunal gave the benefit of the doubt to the appellants, set aside the impugned order, and allowed the appeal.