2017 (6) TMI 1021 - AT - Central Excise

Clandestine manufacture and removal - Gutkha - recovery - railway receipts formed the main basis for quantification of demand - Held that - non-existence of basic, credible and cogent evidences in the case made by the Revenue - Many presumptions and inferences have been made by the adjudicating authority to arrive at his conclusion. The original authority found that the seizure of gutkha at various premises and railway stations without documents are clear-cut evidence of appellant indulging in calendestine removal. We find that while gutkha was seized in various places, the un-accounted clearance of such gutkha by the appellant has to be shown by supporting evidence. The seizure of gutkha in other places by itself will not establish un-accounted clearance. The case of the Revenue against the main appellant with reference to clandestine manufacture and clearance could not be sustained, for want of credible and cogent evidence - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Allegation of un-accounted manufacture and clearance of gutkha.
2. Admissibility and reliability of evidence.
3. Denial of cross-examination rights.
4. Comparison with a similar case of M/s Sunrise Food Products.

Issue-wise Detailed Analysis:

1. Allegation of Un-accounted Manufacture and Clearance of Gutkha:
The main appellant, M/s Shree Raj Pan Masala (P) Ltd, was accused of un-accounted manufacture and clearance of gutkha, resulting in a demand for central excise duty amounting to ?1,06,83,533/- and an equivalent penalty under Section 11AC of the Central Excise Act, 1944. The officers of Central Excise Intelligence conducted searches and seized quantities of “Bombay-1000” gutkha from various premises. However, the appellant argued that there was no incriminating evidence to support the claim of un-accounted manufacture and clearance. The seized gutkha could not be correlated to the goods manufactured by the appellant, and none of the statements from dealers or traders implicated the appellant in un-accounted clearances.

2. Admissibility and Reliability of Evidence:
The appellant contended that the evidence relied upon by the lower authority was not credible. The primary evidence included railway receipts (RRs) which were presumed to indicate the transportation of gutkha. However, the origin or source of these documents was not revealed, and there was no verification at the consignor end or the Delhi railway parcel office. The nature of goods indicated in the RRs did not correlate with the appellant’s products, and the presumption that “Supari” was “Bombay-1000 gutkha” was unfounded. The defense highlighted that no un-accounted finished goods were found during the search, and the seized gutkha could not be linked to the appellant’s factory.

3. Denial of Cross-examination Rights:
The original authority denied the appellant’s request for cross-examination of the individuals whose statements were relied upon, stating that there is no fundamental right to cross-examination in adjudication proceedings. However, the Tribunal emphasized the necessity of following the procedure under Section 9D of the Central Excise Act, 1944, which mandates that the person who made the statement must be examined as a witness before the adjudicating authority. The Tribunal cited the Hon’ble Punjab and Haryana High Court’s decision in the case of G.Tech Industries, which underscored the mandatory nature of this procedure to ensure the reliability of statements.

4. Comparison with a Similar Case of M/s Sunrise Food Products:
The Tribunal noted that a similar case involving M/s Sunrise Food Products, which was based on identical facts and evidence, had been decided in favor of the appellant. In that case, the Tribunal held that the demand for excise duty could not be sustained without tangible evidence. The investigation failed to prove the procurement of additional raw materials or establish the actual consignor and consignee of the alleged clandestinely cleared goods. Given the similarity of the evidence and circumstances, the Tribunal concluded that the present case against M/s Shree Raj Pan Masala (P) Ltd also could not be sustained.

Conclusion:
After careful consideration of the evidence and submissions, the Tribunal found that the case made by the Revenue lacked basic, credible, and cogent evidence. The original authority’s reliance on presumptions and the denial of cross-examination rights were significant errors. Consequently, the impugned order was set aside, and the appeals were allowed, as the allegations of clandestine manufacture and clearance could not be substantiated.