2018 (9) TMI 1057 - AT - Central Excise

Clandestine manufacture and Removal - suppressed production of match bundles in their factory - removal of chemical dipped splints to various group units and other units without payment of duty - Principles of Natural Justice. Held that - Large quantum of documents / worksheets have not been considered by the lower authorities. There are no detailed analysis of these documents in the impugned orders. On the other hand, while the orders of the original authority in these cases are found to be more or less a reproduction of the allegations contained in the respective show cause notices and a mechanical confirmation of the proposals made therein. There is no attempt to sift, let alone apply the test of evidence or reason. We are also unable to fathom why cross examination has been denied in respect of persons from whom statements had been recorded, only on the grounds that they were co-noticees - thus, the appellants have not been given sufficient opportunity and consideration in the proceedings before both the lower authorities - in the interests of justice, it would be appropriate to remand the appeals filed by the assessees for de novo consideration to the original adjudicating authority. Appeal allowed by way of remand.

Issues Involved:
1. Suppression of production and removal of match bundles without payment of duty.
2. Violation of principles of natural justice.
3. Denial of cross-examination of witnesses.
4. Reliance on uncorroborated statements and documents.
5. Department's appeals on setting aside/reduction of penalties and duty demands.
6. Application of the Government's Litigation Policy regarding monetary limits for appeals.

Detailed Analysis:

1. Suppression of Production and Removal of Match Bundles:
The primary allegation against the assessees, including President Match Co. and Sri Sathuragiri Match Co., was that they suppressed production of match bundles, removed chemical-dipped splints to various group units without payment of duty, and cleared the final products without accounting for them. The allegations were supported by a pocket notebook maintained by an office-in-charge, which detailed unaccounted production.

2. Violation of Principles of Natural Justice:
The assessees argued that the impugned orders were passed in violation of the principles of natural justice. They submitted extensive documents and worksheets to disprove the allegations, but these were not considered by the lower authorities. The orders were deemed prejudiced as they ignored the submissions and evidence provided by the noticees.

3. Denial of Cross-Examination of Witnesses:
The assessees requested cross-examination of several witnesses whose statements were relied upon in the proceedings. However, the adjudicating authority allowed cross-examination of only a few witnesses, citing that others were co-noticees. The assessees contended that reliance on statements without allowing cross-examination was contrary to established legal principles, as highlighted in various judicial precedents.

4. Reliance on Uncorroborated Statements and Documents:
The assessees challenged the reliability of the statements, arguing they were stereotyped and identically worded, which is unusual in genuine testimonies. Additionally, they pointed out that crucial documents referred to in the statements were not relied upon in the show cause notices and had been returned to the assessees. They also highlighted the lack of evidence regarding the purchase of raw materials and the sale of finished goods, which are essential to substantiate allegations of clandestine production and removal.

5. Department's Appeals on Setting Aside/Reduction of Penalties and Duty Demands:
The department was aggrieved by the reduction or setting aside of differential duty and penalties by the Commissioner (Appeals) for President Match Co. and Sri Sathuragiri Match Co. The department argued that the assessees controlled the entire operation from raw material supply to the clearance of finished products and should be held liable for duty evasion.

6. Application of the Government's Litigation Policy:
The assessees pointed out that the amounts involved in the department's appeals were below the prescribed monetary limits under the Government's Litigation Policy. They cited a similar case involving Galaxy Match Company, where the department's appeal was dismissed as withdrawn due to the monetary limits.

Conclusion:
The Tribunal found merit in the assessees' contentions that a large quantum of documents and worksheets were not considered by the lower authorities. The orders were seen as mechanical reproductions of the show cause notices without proper analysis or reasoning. The Tribunal also questioned the denial of cross-examination of witnesses solely because they were co-noticees.

The Tribunal decided to remand the appeals filed by the assessees for de novo consideration by the original adjudicating authority. The authority was directed to analyze the documents and worksheets submitted by the noticees and provide reasoned findings. The request for cross-examination of witnesses was to be re-examined and permitted as per law.

Regarding the department's appeals, the Tribunal noted that the amounts involved were below the prescribed monetary limits under the Litigation Policy. Therefore, these appeals were dismissed.

Final Order:
- Appeals filed by assessees (E/266-271/2012, E/42416-42419/2014, E/42421-42424/2014) were allowed by way of remand.
- Appeals filed by the department (E/283-288/2012, E/290-293/2012) were dismissed on monetary limits.
- Cross objections filed by assessees in the department’s appeals were disposed of.

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