2017 (12) TMI 1092 - AT - Central Excise

Clandestine removal - clearance of cone yarn under the guise of hank yarn clearances - evidence - cross eamination of witnesses - Held that - the entire case of the Revenue was based upon the oral evidences in the form of statement of the buyers. He has observed that in as much as there is consistency in the said statements with regard to authenticity of the private records seized under mahazar on different date and details available therein the same has to be given the status of evidence. It is well settled law that the statements can act as a corroborative evidence to the other independent evidences available on record and cannot by itself be adopted as the sole evidence for holding against the assessee. In the present case apart from the said evidences the Revenue has failed to produce any other evidence to show that the appellant was clearing cone yarn under the guise of hank yarn and was indulging in any clandestine activities. The Hon ble Punjab & Haryana High Court in the case of Jindal Drugs Pvt. Ltd. Vs. Union of India 2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT have observed that the deponent of the statement are not only required to be produced for cross examination but examination in chief is also required to be undertaken by the adjudicating authority in terms of the provisions of Section 9D(a) of the Central Excise Act. In the absence of the same the statements have to be kept out of consideration and cannot be relied upon as an evidence. If that be so the said statements cannot be considered to be an evidence and if taken out of the records nothing survives for the Revenue to rely upon as an evidence - the demand of duty against M/s.Venus Cotton Mills Pvt. Ltd. along with imposition of penalty upon them is required to be set aside. Penalty on Managing Director - Held that - as we have set aside the penalty on the manufacturing unit the penalty imposed upon the Managing Director is also set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand of duty and imposition of penalties on M/s. Venus Cotton Mills Pvt. Ltd.
2. Allegations of clandestine removal of cone yarn under the guise of hank yarn.
3. Admissibility and reliance on statements and documentary evidence.
4. Cross-examination and examination-in-chief of witnesses.
5. Confirmation of partial liability as accepted by the appellant before the Settlement Commission.
6. Penalty on the Managing Director.

Detailed Analysis:

1. Demand of Duty and Imposition of Penalties:
The Commissioner confirmed a demand of ?71,68,442/- against M/s. Venus Cotton Mills Pvt. Ltd., along with interest and a penalty of an identical amount under Section 11AC of the Central Excise Act, 1944. Additionally, a penalty of ?1 lakh was imposed under Rule 52A and 173E of the erstwhile Central Excise Rules, 1944 read with Rule 25 of Central Excise Rules, 2001. A penalty of ?1 lakh was also imposed on the Managing Director under Rule 209 of the erstwhile Central Excise Rules, 1944 read with Rule 26 of Central Excise Rules, 2001.

2. Allegations of Clandestine Removal:
The manufacturing unit was alleged to have cleared cone yarn by raising invoices as hank yarn, thereby evading duty from 1999-2000 to 2002-03. The Revenue's case was based on the assertion that the appellant indulged in clandestine activities by clearing cone yarn under the guise of hank yarn clearances.

3. Admissibility and Reliance on Statements and Documentary Evidence:
The Commissioner relied on various statements and documentary evidence, including a small pocket notebook recovered from a third party and statements from buyers. However, the Tribunal noted that the evidence was insufficient to establish clandestine activities. The Tribunal emphasized that allegations of clandestine removal must be established beyond doubt with tangible evidence, not merely on the basis of statements.

4. Cross-examination and Examination-in-chief:
The Tribunal highlighted the importance of cross-examination and examination-in-chief of witnesses. It noted that the adjudicating authority failed to produce the deponents for cross-examination, which undermined the reliability of their statements. The Tribunal referenced the Hon'ble Punjab and Haryana High Court's decision in Jindal Drugs Pvt. Ltd. Vs. Union of India, emphasizing that both cross-examination and examination-in-chief are required for the statements to be considered valid evidence.

5. Confirmation of Partial Liability:
Despite the lack of sufficient evidence to uphold the entire demand, the Tribunal acknowledged that the appellants had accepted liability to the extent of ?21.96 lakhs before the Settlement Commission. Consequently, the Tribunal confirmed the demand to that extent.

6. Penalty on the Managing Director:
Given that the penalty on the manufacturing unit was set aside, the Tribunal also set aside the penalty imposed on the Managing Director. The appeal of the Managing Director was allowed.

Conclusion:
The Tribunal set aside the impugned orders passed by the adjudicating authority, except for the confirmed demand of ?21.96 lakhs accepted by the appellant. The penalties on both the manufacturing unit and the Managing Director were also set aside. The judgment underscores the necessity for robust evidence and proper procedural adherence in cases of alleged clandestine removal.