2018 (7) TMI 1591 - AT - Central Excise

Clandestine removal - cross-examination of all purchasers denied - principles of Natural Justice - illicit clearance plastic bags - parallel invoices - appellant cleared the finished goods namely plastic bags to various traders by raising Kachcha Chiththi/documents. Whether the denial of cross examination of the witnesses by the adjudicating authority has prejudicially impacted the right of the appellant to put forth a proper defence in the matter? Held that - It is quite evident that the quantum of clearances have been determined on the basis of monthly purchases stated by the buyers of the goods in their statements recorded. The quantum of purchase so stated in the statement is not further corroborated. In such a situation when the entire demand against the appellant is based on the uncorroborated statement of purchasers of the finished goods adjudicating authority should have allowed the opportunity for cross examination of each of the person whose statement has been relied for computing the demand. There is no doubt about the fact that appellant was indulging in clandestine clearance of the goods and was evading the payment of duty. However this determination itself is not sufficient to fasten the demand of duty on the appellant. The quantum of goods clandestinely cleared and duty evaded need to be determined on the basis of the principles/ evidences admissible in law. Till the time such a determination is done the mere fact of clandestine clearance is not sufficient confirm the demand - In the present case since the quantification of entire demand against the appellant is based on the quantum of purchases made as stated by the purchaser of the finished goods in their statements, there can be no justification for denial of cross examination as requested by the appellant. In similar situation in the case of Alliance Alloys Pvt Ltd Vs Commissioner Of Central Excise Delhi 2016 (7) TMI 153 - CESTAT CHANDIGARH , this Tribunal has been remanding the matter to the adjudicating authority for allowing the cross examination of the witnesses. This is a case where entire quantification of demand is based on the statements of the purchaser the request for cross examination of the persons tendering the statements should have been allowed, in case the same is not allowed or possible, at least reasons thereof should have been recorded - matter remanded for allowing opportunity of cross examination of the remaining witnesses and determination of the demand and penalty thereafter - appeal allowed by way of remand.

Summary

Issues Involved:
1. Alleged clandestine clearance of finished goods.
2. Denial of cross-examination of witnesses.
3. Determination of duty evasion and penalty.

Issue-wise Detailed Analysis:

1. Alleged Clandestine Clearance of Finished Goods:
The appellant, a manufacturer of plastic polyethylene bags, was accused of clandestine clearance based on documents and statements obtained during a search by Central Excise officers. Notebooks and gate pass books indicated details of clearances without invoices, production records, and daily expenditures. The investigation revealed that the appellant had been clearing goods using "Kachcha Chiththi/documents" and destroying records. Parallel invoices from the octroi department supported these allegations. Statements from various traders confirmed they received goods without proper invoices.

2. Denial of Cross-Examination of Witnesses:
The appellant contested the show cause notice, requesting cross-examination of witnesses whose statements were relied upon. Initially, the adjudicating authority permitted cross-examination of one raw material supplier and two purchasers. The appellant argued that the denial of cross-examination of all witnesses resulted in a denial of natural justice. The tribunal noted that the entire demand was based on uncorroborated statements of purchasers, and the adjudicating authority should have allowed cross-examination of each person whose statement was relied upon.

3. Determination of Duty Evasion and Penalty:
The adjudicating authority confirmed a duty demand of ?11,81,582 along with interest and imposed equivalent penalties on the appellant and a partner. The Commissioner (Appeal) upheld this order. The tribunal observed that while there was substantial evidence of clandestine clearance, the quantification of demand based on uncorroborated statements was insufficient. The tribunal emphasized that the determination of duty evasion must be based on admissible evidence and allowed the appellant's request for cross-examination to ensure a fair defense.

Conclusion:
The appeal was allowed by way of remand for cross-examination of remaining witnesses and re-determination of the demand and penalty. The adjudicating authority was directed to complete the proceedings within three months, ensuring cooperation from the appellant. The tribunal underscored the importance of cross-examination in establishing the truth and ensuring due process.