2016 (10) TMI 871 - AT - Central Excise

Clandestine removal - SSI unit - Notification No. 8/98 dt. 02.06.1998 and 8/99 dt. 28.02. 1999 - Seizure of the goods and commercial invoices, register containing details of sales and a chart containing details of sales - demand of duty on the value excess of the turnover eligible for exemption - Held that - duty demand was confirmed by the authorities below based on the commercial invoice which are alleged to have been corroborated either with the transporter LR, follow up reports of the alleged consignee or details of payment - except commercial invoices there is no other evidence of clearances of goods, or no confirmation of receipt of goods by the alleged consignee of such goods and no payment receipt against such invoices. Deduction was claimed on the ground that though Lorry receipt numbers was mentioned against such commercial invoices but no LR was found either from the Appellant premises or from the transporter or from the consignee - Held that - the statement of two of the transporters were recorded and relied upon but only two dispatch register were recovered which has not been corroborated with the Lorry receipt or commercial invoice - when except confirmation from alleged consignee, no single statement is on record and no cross examination was allowed to check veracity of confirmation; the demand cannot be made on such value. Even though the demand is mainly based upon the commercial invoices, but during investigation any excess production than recorded in books of the Appellant concern was not found - Appeal is partly allowed.

Issues Involved:
1. Confirmation of duty demand against M/s Modern Laboratories.
2. Imposition of penalty on M/s Modern Laboratories and its partner, Shri Arun Kharia.
3. Validity of the evidence used to support the duty demand.
4. Denial of cross-examination of witnesses.
5. Confiscation of land, building, and machinery of M/s Modern Laboratories.

Issue-wise Detailed Analysis:

1. Confirmation of Duty Demand Against M/s Modern Laboratories:
The duty demand was initially confirmed by the adjudicating authority based on commercial invoices, registers, and charts found during the investigation. The Commissioner (Appeals) reduced the duty demand from ?15,86,351/- to ?9,40,363/-. The Appellant argued that the demand was erroneous as there was no corroborative evidence of clearances made without payment of duty. The Tribunal found that except for commercial invoices, there was no evidence of removal of goods, receipt of payment, or acknowledgment by the consignee. Therefore, the demand on the value of ?40,99,056/- for 1998-99 and ?45,48,417/- for 1999-2000 was not sustainable.

2. Imposition of Penalty on M/s Modern Laboratories and Its Partner, Shri Arun Kharia:
The adjudicating authority imposed a penalty under Section 11AC and a redemption fine on M/s Modern Laboratories, and a penalty on Shri Arun Kharia. The Commissioner (Appeals) reduced the penalty on M/s Modern Laboratories and set aside the penalty on Shri Arun Kharia. The Tribunal upheld this decision, stating that since the duty demand was significantly reduced, the penalties should also be proportionately reduced. The Tribunal confirmed that M/s Modern Laboratories was liable for a reduced penalty of ?21,331/- and rejected the penalty on Shri Arun Kharia.

3. Validity of the Evidence Used to Support the Duty Demand:
The Appellant contended that the demand was based on uncorroborated commercial invoices and charts. The Tribunal found that the evidence was insufficient as no Lorry Receipts (LRs) were found, and there was no confirmation from consignees or evidence of payment receipts. The Tribunal held that the demand could not be sustained merely on commercial invoices without supporting evidence. The Tribunal also noted that the Commissioner (Appeals) did not provide reasons for denying the Appellant's claims regarding the reduction of the amounts.

4. Denial of Cross-Examination of Witnesses:
The Appellant argued that the denial of cross-examination of alleged buyers and transporters was illegal. The Tribunal agreed, stating that the case was based on follow-up reports and other third-party documents. The denial of cross-examination was a serious infraction, and the demand could not be sustained without allowing the Appellant to test the veracity of the evidence. The Tribunal cited judgments supporting the right to cross-examine witnesses in such cases.

5. Confiscation of Land, Building, and Machinery of M/s Modern Laboratories:
The adjudicating authority ordered the confiscation of land, building, and machinery, which was set aside by the Commissioner (Appeals). The Tribunal found no merit in the revenue's appeal for confiscation, as the duty demand was significantly reduced, and there was no evidence of clandestine removal of goods. The Tribunal dismissed the revenue's appeal on this ground.

Conclusion:
The Tribunal partly allowed the appeal filed by M/s Modern Laboratories, reducing the duty demand to ?91,832/- and the penalty to ?21,331/-. The revenue's appeals were dismissed, and the penalty on Shri Arun Kharia was set aside. The Tribunal emphasized the lack of corroborative evidence and the denial of the right to cross-examine witnesses as key factors in its decision.

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