2015 (4) TMI 891 - AT - Central Excise

Confiscation of seized goods and plant & machinery - Excess stock found lying in the factory - Demand of duty alongwith interest and penalty imposed on the basis of the pocket diary on Appellant No.1 - Fabricated evidence - Held that - On perusal of the Panchnama, I find that there are some blanks in the panchnama. The investigating officers during cross examination deposed that the blanks were due to an oversight. - On being asked as to why 320 pcs were seized when as per diary there should be physical stock of 973 pcs and as per lot register, there should be 976 pcs, he stated that the seizure of that quantity of unaccounted goods were affected, which were available in the factory. Further, on being asked, on other issues, he stated that since considerable time has elapsed, he was unable to explain the exact reason, and he did not prepare the Annexure-A of the Panchnama. There is no dispute that some spaces in the Panchnama were left blank, which could not be explained by the investigating officers during the cross examination, appears to be a casual approach. The Adjudicating Authority observed it might be mistakenly shown as 3 bales against 27 bales in the pocket diary. In some cases, it is observed that the name of the consigner or the party code was not mentioned in the lorry receipts but the other details of lorry receipts are tallied with the gate-pass book of the transporters. It is relied upon the grey register recovered from the transporters to corroborate the pocket diary. The appellant disputed grey register of the transporters and requested the cross examination of the transporters, which has not been allowed. - there were discrepancies in the pocket diary and grey register as well as the documents of the transporters cannot be accepted as the cross examination of the transporters was not allowed. It is also disputed the contents of Lorry Receipts recovered from the transporter in so far as out of 17 LRs not a single LR is in the name of the Appellants either as consignor or as consignee. Further as per the said LRs deliveries were made from Bhiwandi to Saroli and no consignment was delivered from/to the Appellants address. As regards Grey Register, the said register is maintained truck-wise by Moongipa Roadways P Ltd. Further in the said register, nowhere the Appellant name was mentioned. None of the ingredients of sub rule (1) of 173(Q) of the said Rules would be applicable, and no Modvat Credit was availed by the appellant on the seized raw materials. So, confiscation of raw material and imposition of redemption fine would not sustained. The Tribunal in the case of Aishwarya Plast Exporters Pvt Ltd vs. Commissioner of Central Excise, Vadodara 2009 (4) TMI 653 - CESTAT, AHMEDABAD held that excess raw material lying in factory premises, non-recording would not invite confiscation. So, the confiscation of the raw material, plant and machinery would not be sustained. - confiscation of seized goods, plant and machinery etc., and imposition of redemption fine and demand of duty alongwith interest and penalties on the appellant are not sustainable. Accordingly, the impugned orders are set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Application for recalling the Miscellaneous Order rejecting the extension of the stay order.
2. Legitimacy of the Panchnama and the pocket diary as evidence.
3. Demand of duty, interest, and penalties based on the pocket diary and transporters' documents.
4. Confiscation of seized goods, plant, and machinery.
5. Denial of cross-examination of transporters.

Detailed Analysis:

1. Application for Recalling the Miscellaneous Order:
The applicant sought to recall the Miscellaneous Order No M/10004/2015 dated 6.1.2015, which rejected the extension of the stay order. However, since the appeal was already listed for a regular hearing, the application was deemed unnecessary and dismissed as infructuous.

2. Legitimacy of the Panchnama and the Pocket Diary:
The appellants contested the authenticity and preparation of the Panchnama and the pocket diary, claiming it was fabricated. They argued that the Central Excise Officers had taken signatures on blank papers and later prepared the Panchnama. The pocket diary, allegedly recovered from the Excise Clerk, was claimed to have been purchased by the officers and filled under duress. The appellants provided several pieces of evidence, including complaints to the Judicial First Class Magistrate and the Commissioner of Central Excise, affidavits, and news articles, to support their claims. The Tribunal found discrepancies in the Panchnama, noting blank spaces that the investigating officers could not satisfactorily explain.

3. Demand of Duty, Interest, and Penalties:
The demand of duty Rs. 21,30,806/- along with interest and penalties was based on entries in the pocket diary and transporters' documents. The appellants highlighted several discrepancies between the pocket diary and the transporters' records, such as differences in the number of bales received and dispatched. The Tribunal noted these discrepancies and emphasized that the demand could not be sustained merely on the basis of the pocket diary without substantial corroborative evidence. The Tribunal referenced previous judgments, asserting that clandestine manufacture and removal of goods cannot be established solely based on a pocket diary.

4. Confiscation of Seized Goods, Plant, and Machinery:
The Commissioner had ordered the confiscation of seized goods and imposed a redemption fine of Rs. 2,60,000/-. Additionally, the land, building, plant, and machinery were confiscated with a redemption fine of Rs. 50,000/-. The Tribunal found that the confiscation of raw materials, where no Modvat Credit was availed, was contrary to Rule 173(Q) of the Central Excise Rules 1944. The Tribunal cited the case of Aishwarya Plast Exporters Pvt Ltd, which held that excess raw material lying in the factory premises does not warrant confiscation. Consequently, the confiscation orders and related fines were not sustained.

5. Denial of Cross-Examination of Transporters:
The appellants were denied the opportunity to cross-examine the transporters, whose documents were used as evidence. The Tribunal referenced the Delhi High Court's rulings in J & K Cigarettes Ltd and Basudev Garg, which held that documents cannot be relied upon if cross-examination is not permitted. The Tribunal concluded that the transporters' documents could not be accepted as evidence due to the denial of cross-examination, further weakening the case against the appellants.

Conclusion:
The Tribunal set aside the impugned orders, ruling that the confiscation of seized goods, plant, and machinery, as well as the demand of duty, interest, and penalties, were not sustainable. Both appeals filed by the appellants were allowed, and the application for recalling the Miscellaneous Order was dismissed as infructuous.