2016 (10) TMI 567 - AT - Central Excise

Clandestine removal of excisable goods - demand of duty with interest - imposition of penalty - whether appellants are indulged in clandestine manufacture and clearance of Iron and Steel finished goods falling under Chapter-75 of the Central Excise Tariff Act 1985? - A daily performance report of H R Strips prepared by the Quality Control in charge of GSCL - Held that - clandestine removal is a serious charge and cannot be held on the basis of presumption assumption and surmises. It is observed that daily performance report recovered from the factory premises of GSCL only indicate the quantities tested by the Quality Control In-charge of the appellant and does not convey the daily manufacturing quantity of GSCL. Statement of Shri Pradip Chatterjee dated 07.03.2006 also indicate that this report is not maintained regularly. There is no correlation brought out by the Adjudicating authority that the quantities mentioned in this report are not reflected in the statutory records of Appellant GSCL. Appellant also requested for the cross examination of Shri Pradip Chatterjee but the same has not been entertained by the Adjudicating authority. It is now a well accepted legal proposition that by virtue of Section 9D of the Central Excise Act 1944 cross examination of the relied upon witness has to be extended when the same is sought for by the aggrieved party. If for any reasons the request cannot be entertained then the same has to be rejected and informed to the concerned party separately for redressal if he intends to appeal against such rejection. In the absence of cross examination of the concerned witness the evidentiary value of that statement is lost. Alleged shortage of finished goods as per a joint stock taking held on 07.09.2005 - Held that - When on the date of stock taking itself appellant was reluctant to sign the stock taking made by the department and the authorized representatives then it cannot be said that GSCL has extended any concessions to the department in stock taking in whatever manner they want. Stock was required to be verified on actual weighment basis as per relied upon case laws and not on the basis adopted by the department while calculating shortages in stock of the appellant. Charge of the department regarding clandestine removal and demand on this ground is not sustainable and is required to be rejected. Weighment slips of the Golden Weighbridge under the control of appellant GSCL - Held that - The statements of relied upon witnesses are the only evidences on record as they are only authenticating the documents recovered from the factory/official premises of the appellants. There is no evidence of extra raw materials purchased/procured by the appellant GSCL and extra power consumption. During Stock taking no excess/shortage in raw materials were found. Appellant GSCL and his employees did not admit to clandestine removal. No doubt the investigation conducted do suggest a strong suspicion about clandestine activities but a suspicion howsoever grave cannot take the place of proof of clandestine clearance like seizure of clandestinely removed goods seizure of cash admitted by the concerned persons to be sale proceeds of the illicitly removed goods excess procurement of raw materials excess power utilization confirmation by some of the transporters and recipients to indicate that such clandestined cleared goods have been transported/received by them - clandestine removal of goods cannot be proved. Imposition of penalties - Held that - once on merit case is decided in favour of the appellants then penalties cannot be imposed upon them under various provisions of the Central Excise Act 1944 and the rules made thereunder. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand of ?9,86,411/- based on the Daily Performance Report of HR Strips.
2. Demand of ?4,47,064/- due to shortages of finished goods and waste and scrap.
3. Demand of ?7,11,407/- based on weighment slips recovered from GSCL.
4. Imposition of penalty on M/s. Hariana Iron Works (P) Ltd.

Detailed Analysis:

1. Demand of ?9,86,411/- based on the Daily Performance Report of HR Strips:
The Revenue's case was based on a Daily Performance Report prepared by Shri Pradip Chatterjee, quality control in-charge of GSCL, indicating production quantities from 18.08.2005 to 31.08.2005. The appellant argued that this report was merely a quality check document and not an indication of daily production. They also requested cross-examination of Shri Pradip Chatterjee, which was denied. The Tribunal observed that the document did not conclusively indicate daily manufacturing quantities and that the denial of cross-examination diminished its evidentiary value. The Tribunal emphasized that clandestine removal cannot be presumed without corroborative evidence such as extra raw material procurement, power consumption, or seizure of goods.

2. Demand of ?4,47,064/- due to shortages of finished goods and waste and scrap:
The demand was based on joint stock verification conducted on 07.09.2005, using a method suggested by a GSCL employee under distress. The Tribunal noted that the stock-taking was not based on actual weighment but on average weights, which the appellant did not agree with. The Tribunal cited case laws supporting the requirement of actual weighment for stock verification and concluded that the method used by the Revenue was not reliable for establishing shortages and clandestine removal.

3. Demand of ?7,11,407/- based on weighment slips recovered from GSCL:
This demand was based on weighment slips from Golden Weighbridge and statements from GSCL employees. The Tribunal found that the statements were the primary evidence and that the denial of cross-examination was unjustified. The Tribunal noted the absence of other corroborative evidence such as extra raw material procurement, excess power consumption, or seizure of goods. The Tribunal concluded that mere suspicion, without concrete evidence, cannot substantiate a charge of clandestine removal.

4. Imposition of penalty on M/s. Hariana Iron Works (P) Ltd.:
The appellant argued that they could not be penalized for their name appearing on third-party weighment slips and that there was no statutory obligation to maintain a logbook for vehicles under Central Excise law. The Tribunal agreed, stating that penalties could not be imposed without concrete evidence of involvement in clandestine activities.

Conclusion:
The Tribunal allowed the appeals, ruling that the demands and penalties were not sustainable due to the lack of concrete evidence and the improper denial of cross-examination. The Tribunal emphasized that charges of clandestine removal require substantial proof and cannot be based on presumptions or assumptions. The appeals were pronounced in favor of the appellants on 28.09.2016.