2016 (8) TMI 435 - AT - Central Excise

Clandestine removal of sponge iron - Demand of duty alongwith interest and penalty - period involved is 2005-2006 to 2006-2007 - no statement of appellant admitting clandestine removal - Held that - the appellant never confessed having removed any goods clandestinely. As the cross examination of transporters and the commission agent was denied and having regard to the fact that such denial certainly caused prejudice to the appellant as their statements were relied upon for the purpose of sustaining the allegation against the appellant by the primary adjudicating authority, the minimum consequence of denial of such cross examination is that their statements cannot be used for the purpose of sustaining allegation. Therefore, once the statements of the transporters and commission agent are ignored, there is nothing much left to sustain the allegation against the appellant. - Decided against the Revenue

Issues:
- Allegation of clandestine removal of goods
- Denial of cross-examination
- Reliance on third-party evidence
- Legal principles regarding fair hearing and prejudice
- Applicability of judicial pronouncements

Allegation of Clandestine Removal of Goods:
The case involved an appeal by Revenue against an order confirming a demand for payment against a company for allegedly clandestinely clearing sponge iron. The primary adjudicating authority imposed a demand of Rs. 34,67,766 along with penalties. However, the Commissioner (Appeals) found the demand unsustainable and set aside the order. The Revenue contended that records of transporters and commission agents indicated clandestine removal, but the appellant did not admit to such actions. The advocate for the respondent argued that there was no clandestine clearance, and cross-examination of co-noticees was denied, affecting the reliability of the evidence.

Denial of Cross-Examination:
The denial of cross-examination of transporters and the commission agent was a crucial point in the judgment. The appellant never confessed to clandestine removal, and the statements of these individuals were relied upon without the opportunity for cross-examination. The judgment cited the case of Dharampal Satyapal Ltd. Vs. CCE, emphasizing the importance of fair procedures and prejudice in such situations. The denial of cross-examination led to the exclusion of these statements from consideration, significantly weakening the case against the appellant.

Reliance on Third-Party Evidence:
The judgment highlighted the insufficiency of third-party evidence, such as statements from transporters and commission agents, in sustaining allegations of clandestine removal. It was emphasized that without concrete and corroborative evidence directly linking the appellant to the alleged actions, the demand for duty could not be upheld. The lack of substantial evidence, including the absence of physical verification of stock and other supporting documents, weakened the case against the appellant.

Legal Principles Regarding Fair Hearing and Prejudice:
The judgment discussed legal principles related to fair hearing and prejudice, emphasizing that every violation of natural justice may not render an order null and void. The ultimate test was determined to be the presence of prejudice or the lack of fair hearing. The denial of cross-examination in this case was deemed to have prejudiced the appellant, leading to the exclusion of certain evidence and weakening the case against them.

Applicability of Judicial Pronouncements:
The judgment referenced various judicial pronouncements to support the decision, highlighting that allegations of clandestine removal cannot be sustained solely based on third-party statements when cross-examination is denied. Cases such as Sulekhram Steels Pvt. Ltd. Vs. CCE, Rutvi Steel & Alloys Vs. CCE, and Agarsen Syntex Pvt. Ltd. Vs. CCE were cited to illustrate the legal precedent in such matters. Ultimately, the appellate tribunal found no infirmity in the impugned order and dismissed Revenue's appeal, along with disposing of cross-objections.

By analyzing each issue comprehensively, the judgment provided a detailed and thorough examination of the case, emphasizing the importance of procedural fairness, evidentiary support, and legal principles in reaching its decision to dismiss Revenue's appeal.

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