2016 (2) TMI 532 - AT - Central Excise

Clandestine removal of branded Gutkha - entire demand has been confirmed on the basis of seized documents from third parties - statement of third parties - denial of cross examination - violation of provisions of section 9(D) of the Central Excise Act, 1944. - Held that - In the impugned order, the statement of appellants were relied upon by the adjudicating authority to allege clandestine manufacture and removal of goods. We find that all the appellants filed their affidavits and these affidavits have not been examined. Therefore, statements given at the time of investigation cannot be blindly relied, as affidavits supplied by the appellants have substantial evidentiary value. Moreover, no cross examination has been granted by the adjudicating authority to reveal the truth in the matter. Therefore, the statement of appellants are not reliable in the absence of corroboratory evidence. We also take note of the fact that Shri Ajay Gupta who is prime witness of the case was not examined and is not made the party to the case. In the light of the decision of this tribunal in the case of M/s. Aswani & Co. 2014 (12) TMI 1213 - CESTAT NEW DELHI and the discussion herein above, the case of the revenue remains inconclusive. Therefore, we hold that investigation conducted by the Revenue having loopholes is not proper. Accordingly, the allegation of clandestine manufacture and removal of goods is not sustainable. Consequentially, the impugned order is not sustainable in the eyes of law. - Demand set aside - Decided in favor of assessee.

Issues Involved:
1. Demand of Central Excise Duty on alleged clandestine manufacture and removal of Gutkha.
2. Reliance on third-party documents and statements.
3. Denial of cross-examination of witnesses.
4. Admissibility and reliability of evidence.
5. Extended period of limitation.

Detailed Analysis:

1. Demand of Central Excise Duty on Alleged Clandestine Manufacture and Removal of Gutkha:
The case against M/s. Balajee Perfumes (M/s. BP) involved the alleged clandestine manufacture and removal of Maruti, Ajeet, and Kaveri branded Gutkha without payment of Central Excise duty. The demand amounted to Rs. 4,50,64,179/- along with interest and an equivalent penalty. The investigation was based on intelligence reports, searches, and seized documents indicating clandestine activities. The adjudicating authority confirmed the demand based on the seized documents and statements from individuals involved.

2. Reliance on Third-Party Documents and Statements:
The entire demand was based on documents seized from third parties, namely M/s. Devakikrishna Traders and M/s. Damodar Traders, and the statements of Shri Pawan M Prabhu and Shri Avinash M Baliga. The appellants argued that reliance on these documents and statements without proper corroboration and cross-examination was a violation of Section 9(D) of the Central Excise Act, 1944. The Tribunal found that the documents recovered from third parties and the statements given by individuals were not sufficient to establish clandestine removal without corroborative evidence.

3. Denial of Cross-Examination of Witnesses:
The appellants requested the cross-examination of witnesses whose statements were used against them, which was denied by the adjudicating authority. The Tribunal held that the denial of cross-examination violated the principles of natural justice. It was observed that the statements could not be relied upon without cross-examination, as affirmed by the Tribunal in the case of M/s. Aswani & Co.

4. Admissibility and Reliability of Evidence:
The Tribunal scrutinized the evidence presented by the Revenue, including railway receipts and diaries recovered from third parties. It was found that the railway receipts did not conclusively prove clandestine removal as they did not explicitly link to M/s. BP. The diaries were also deemed unreliable as they contained entries related to various goods and not specifically to Maruti Gutkha. The Tribunal emphasized that corroborative evidence was necessary to support the allegations of clandestine activities.

5. Extended Period of Limitation:
The appellants argued against the invocation of the extended period of limitation. The Tribunal did not specifically address this issue in detail but focused on the lack of substantial evidence to support the allegations of clandestine removal.

Conclusion:
The Tribunal concluded that the Revenue failed to provide sufficient evidence to substantiate the allegations of clandestine manufacture and removal of Gutkha. The investigation had significant loopholes, and the reliance on uncorroborated third-party documents and statements was insufficient. The denial of cross-examination further weakened the Revenue's case. Consequently, the impugned order was set aside, and the appeals were allowed with consequential relief to the appellants.

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