2018 (10) TMI 616 - AT - Central Excise

Clandestine removal - shortage of finished goods and raw material - demand based on weightment slips - reliability on statements - it was alleged that appellant could not produce any record/documents relating to stock of raw material and finished goods - It further appeared that the stock of raw materials was unaccounted in the factory of M/s Prakash Ispat with an intent to remove the same after manufacturing of finished goods clandestinely. Held that - The Department is heavily relying upon the statement of Shri Rajendra Prasad Jaiswal, Weighment Clerk of M/s. Jain Dharamakanta, Sikandrabad, to prove the entries mentioned in weighment slips allegedly belonging to the appellant. However, we find that the said statement of Shri Rajendra Prasad Jaiswal, Weighment Clerk is hit by Section 9 D of Central Excise Act, 1944 inasmuch as the learned Commissioner has not verified the fact that Shri Rajendra Prasad Jaiswal is dead or alive, therefore, the said statement cannot be relied upon as evidence - Also, there are inconsistency in his statement as explained by the learned Counsel for the appellant and these facts have not also been corroborated from the owner of M/s. Jain Dharmakanta. Hon ble High Court of Allahabad in the case of Continental Cement Company Vs. Union of India 2014 (9) TMI 243 - ALLAHABAD HIGH COURT held that charge of clandestine manufacture & removal is a serious charge & it has to be proved by bringing on record clinching evidence in the form of purchase of excess raw materials, use of extra electricity, sale of final products, clandestine removal, transportation, payment & realization of sale proceeds - in the present case, there is no evidence to prove that appellant was involved in clandestine manufacture & removal of goods. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Liability to pay Central Excise duty and penalties for clandestine removal of goods.
2. Validity and reliability of evidence, including statements and weighment slips.
3. Applicability of the SSI exemption under Notification No. 8/2003-CE.
4. Procedural compliance with Section 9D of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Liability to Pay Central Excise Duty and Penalties:
The appellants were held liable to pay Central Excise duty of ?2,68,12,628/- along with equal penalty under Rule 25 of CER, 2002 read with Section 11AC of the Central Excise Act, 1944. Additional penalties were imposed under Rule 26 of CER, 2002 on the directors and manager. The department alleged that M/s Prakash Ispat Udyog Pvt. Ltd. engaged in the clandestine removal of MS Flats without paying excise duty, exceeding the SSI exemption limit.

2. Validity and Reliability of Evidence:
The evidence relied upon by the Revenue included statements and weighment slips, particularly the statement of Shri Rajendra Prasad Jaiswal, Weighment Clerk of M/s Jain Dharamkanta. The tribunal found several inconsistencies and anomalies in these statements and weighment slips. The statement of Shri Rajendra Prasad Jaiswal was not corroborated by the owner of M/s Jain Dharamkanta or verified for its authenticity. The tribunal noted that the weighment slips were defective, lacked the name and address of M/s Prakash Ispat, and did not bear original signatures. The tribunal concluded that these documents could not be solely relied upon to confirm the huge demand against the appellant.

3. Applicability of SSI Exemption:
The Revenue argued that the appellant's two units, one at Ghaziabad and the other at Sikandrabad, could not simultaneously avail of the SSI exemption and Cenvat credit. However, the tribunal referenced the Hon'ble Supreme Court's judgment in the case of Innovative Tech Pack, which allowed such a scenario, thereby invalidating the Revenue's argument.

4. Procedural Compliance with Section 9D:
The tribunal highlighted the non-compliance with Section 9D of the Central Excise Act, 1944, which mandates the verification of witness statements. The learned Commissioner had not verified whether Shri Rajendra Prasad Jaiswal was dead or alive, making his statement inadmissible as evidence. This procedural lapse was critical in the tribunal's decision to set aside the impugned order.

Conclusion:
The tribunal found that the charge of clandestine manufacture and removal was not substantiated with concrete evidence such as excess raw material purchase, extra electricity usage, or realization of sale proceeds. The tribunal set aside the impugned order and allowed the appeals with consequential relief to the appellants.