2017 (9) TMI 546 - AT - Central Excise

Clandestine manufacture and removal - melting scrap and M.S. Ingots used in the manufacture of M.S. Steel ingots, rolled bars and rods, falling under Chapter 72 of the Central Excise Tariff Act, 1985 - Though, pursuant to the direction of the Tribunal, the original authority had called the witnesses for cross-examination, but they did not tender themselves for the same - principles of Natural Justice - Held that - the Department has not made any serious efforts to ensure the presence of the witnesses. Since the witnesses did not appear for cross-examination, the original authority should have given a clear finding regarding application of provisions of Section 9 D (1) in the present proceedings. In this context, the law is well settled that admissibility of evidence is required to be followed in the adjudication proceedings, wherein the adjudicating authority is required to examine the witnesses and thereafter, to form the opinion about the admissibility of statements tender by them - In the present case, since the Adjudicating Authority did not observe the mandates of Section 9 D of the Central Excise Act, 1944, which is mandatory in nature, in our considered view, reliance cannot be placed on the statements of various witnesses alone, to frame the charges against the appellant for confirmation of the adjudged demand. The evidences available in the present case are not sufficient enough to establish a case of clandestine manufacture and clearance on the part of the main appellant company - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Confirmation of Central Excise Duty demand.
2. Imposition of penalties on the appellant company and its director.
3. Allegations of clandestine removal of goods without payment of duty.
4. Admissibility and reliance on witness statements.
5. Adequacy of corroborative evidence.

Issue-wise Detailed Analysis:

1. Confirmation of Central Excise Duty Demand:
The Commissioner of Central Excise, Jaipur, confirmed a Central Excise Duty demand of ?1,50,60,802/- along with interest and an equal amount of penalty on the appellant company. The demand was based on allegations that the appellant received unaccounted raw materials and clandestinely removed manufactured goods without payment of duty.

2. Imposition of Penalties:
A penalty of ?5,00,000/- was imposed on the Director of the appellant company. The adjudication order also dropped penal proceedings against other co-noticees. However, the Tribunal set aside the initial adjudication order and remanded the matter for cross-examination of witnesses.

3. Allegations of Clandestine Removal of Goods:
The allegations included receiving unaccounted raw materials from various suppliers and using them to manufacture M.S. bars, which were then clandestinely removed from the factory. The Department's investigation involved searches and scrutiny of documents, revealing discrepancies and unaccounted transactions.

4. Admissibility and Reliance on Witness Statements:
The Tribunal emphasized the importance of cross-examination for the admissibility of witness statements. Despite the Tribunal's directive, the witnesses did not appear for cross-examination. The Tribunal noted that the Department did not make serious efforts to ensure the presence of witnesses. The Tribunal highlighted that reliance on uncorroborated statements without cross-examination violated principles of natural justice and Section 9 D of the Central Excise Act, 1944.

5. Adequacy of Corroborative Evidence:
The Tribunal examined the corroborative evidence presented by the Department and found it insufficient to establish clandestine manufacture and clearance. Key points included:
- Loose sheets with truck numbers were explained by the appellant and reflected in the depot's books of accounts.
- Alleged receipt of 78.22 MT of M.S. Ingots lacked corroboration beyond third-party records and statements.
- Purchase of M.S. Saria was accompanied by sales tax documents, and the statements of dealers and brokers were not corroborated.
- Payments of commission were made through cheques, and the return of cash was not substantiated.
- The principle of preponderance of probability was not met due to insufficient evidence.

Conclusion:
The Tribunal concluded that the available evidence was not sufficient to establish a case of clandestine manufacture and clearance. Consequently, the impugned order was set aside, and the appeals were allowed in favor of the appellants. The Tribunal underscored the necessity of adhering to legal standards for evidence admissibility and the importance of corroborative evidence in confirming adjudged demands.