2018 (5) TMI 974 - AT - Central Excise

Penalty on co-noticee u/r 26(1) of the CER 2002 - clandestine manufacture and clearance of Gutka - entire case of Revenue against the appellant is based on the assertion that the Mahindra jeep, which was used for clandestine clearance of Gutka is owned by the appellant - Held that - the records show otherwise. The record of the Government of Maharashtra Motor Vehicle Department, Pune, produced by the appellant shows Shri Kantilal B. Mohite, the main noticee, is the owner of MH12 BG3268 having chassis No MA1NV2ABA12M 22644 with effect from 23.3.2009. The said record also shows that the previous owner was the appellant - there is no no merits in the claim of the appellant that the appellant was the owner of the vehicle at the material time when alleged evasion of excise duty happened. Another allegation is that the appellant had supplied the packing machines to the main noticee - Held that - the assertion of Revenue made to the effect that the appellant had passed money and machines for purchase of D.G. Sets and manufacture of gutka through Shri Javed cannot be sustained - Revenue has not been able to ascertain the identity of Shri Javed and the appellant has denied any knowledge of any person by the name of Javed . The appellant has also denied given any money or machines to Shri Javed - this ground against appellant also fails. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Imposition of penalty on a conoticee for evasion of Central Excise duty
- Allegations against the conoticee regarding clandestine manufacture and clearance of Gutka
- Denial of cross-examination and reliance on co-accused statements as substantive evidence

Analysis:
1. Imposition of Penalty: The appeal involved a conoticee in a case of evasion of Central Excise duty where a penalty of ?28.35 crores was imposed under rule 26(1) of the Central Excise Rules, 2002. The penalty was equal to the duty evaded by the main noticee. The conoticee contested the imposition of the penalty, claiming no role in the clandestine activities.

2. Allegations of Clandestine Activities: The appellant, as a conoticee, was accused of involvement in the clandestine manufacture and clearance of Gutka by the main noticee. The evidence against the appellant was primarily based on statements of various individuals, including the main noticee. The appellant's defense highlighted inconsistencies and lack of hard evidence to substantiate the claims made against him. The appellant's ownership of a Mahindra jeep, alleged financial transactions, and supply of packing machines were key points of contention.

3. Cross-Examination and Reliance on Co-Accused Statements: The appellant sought cross-examination of witnesses to challenge the evidence presented by the Revenue. However, the cross-examination request was denied. The Revenue relied on co-accused statements as substantive evidence, citing legal precedents. The denial of cross-examination was defended by the Revenue, stating that it did not violate principles of natural justice.

4. Judgment: Upon thorough analysis of the evidence and arguments presented, the Tribunal found no merit in the allegations against the appellant. The Tribunal noted discrepancies in the claims made by the Revenue, particularly regarding the ownership of the Mahindra jeep and the supply of packing machines. The lack of concrete evidence, inability to locate key individuals mentioned in the statements, and retractions made by the main noticee led to the dismissal of the allegations against the appellant. As a result, the appeal was allowed, and the penalty imposed on the conoticee was set aside.

In conclusion, the judgment highlighted the importance of substantiated evidence in cases of alleged tax evasion and emphasized the need for thorough examination of facts before imposing penalties on conoticees based on statements of co-accused individuals.