2019 (4) TMI 638 - AT - Central Excise

Clandestine production and removal - MS ingots - shortage of inputs and finished goods - retraction of statements - no proper investigations carried out - cross-examination of various persons denied - demand based kn assumptions and presumptions - Held that - Revenue has made the case of clandestine removal of the manufactured goods and subsequent raising of demand on such huge quantity of without properly corroborating evidences on record. After going through the impugned order, it is found that the entire show cause notice is based on the stock taking report and the various statements recorded from the Authorised Representative, Transporter and Director of the appellant company. There is no evidence regarding any movement of goods by trucks or any other means to and from the factory of the appellant. No adequate enquiry or investigation from the transporter was carried out by the department. It is also on record that the department has got the complete address of most of the buyer of the appellant who are well known established concerns. However, there was no investigation regarding receipt of the said quantity which were alleged to be cleared by the appellant - No evidence was brought during the investigation regarding any evidence of receipt of money by the appellant as there was no seizure of cash at all. From the investigation, it is clear that in the present case, no evidence has been gathered by the Revenue. The allegation of clandestine removal of finished goods and the raw material are based purely on the assumption and presumption and surmises and conjecture. No corroborative evidence was adduced by the Revenue in support of alleged clandestine removal of the goods. It is well settled that the charge of clandestine removal is a serious charge and the demand cannot be made on the basis of mere surmises and conjectures and assumption and presumption. Non-accountal of the receipt of raw material or clandestine removal of the goods cannot be on the basis of presumption. Further, in the alleged clearance of 19352.552 of final product is based upon the show cause notice issued of SSSIL alleging the manufacture and clearance of 18501.04 MT of sponge iron to the appellant. We find that the reliance placed on the another show cause notice without further corroboration is of no use in the present case. Even it is on the record that the document on which the clandestine removal and manufacture is fastened on the appellant has been recovered from the guest house of the employee of M/s SSSIL this at the best as 3rd party evidence and the reliance on which cannot be without the further corroboration. It is also on record that the ld. adjudicating authority has denied the cross-examination asked by the appellant - The admissibility of the evidence without following the procedure established under Section 9(D)(i) of the Act, is not admissible as a evidence in the investigation proceeding as mentioned in para 4.2 of order - Also in this case, raw material for the manufacture of the ingot by the appellant has come from the State of Orissa. No evidence on transport whatsoever has been gathered by the Revenue about the transport of the goods from the one state to another state which is well documented at the check post of two states. Impugned order is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Confirmation of demand under Section 11A(4) of the Central Excise Act, 1994.
2. Imposition of penalties under Section 11AC of the Act and Rule 26(1) of the Central Excise Rules, 2002.
3. Denial of cross-examination of key witnesses.
4. Allegation of clandestine removal of goods.
5. Evidentiary value of statements and documents seized.
6. Adherence to principles of natural justice.

Issue-wise Detailed Analysis:

1. Confirmation of Demand:
The Commissioner confirmed a demand of ?4,21,64,032/- under Section 11A(4) of the Central Excise Act, 1994, along with interest under Section 11AA and a penalty of an equivalent amount under Section 11AC. This was based on allegations of evasion of duty through suppression of production and removal of MS ingots without proper accounting and payment of duty.

2. Imposition of Penalties:
A personal penalty of ?50 lakhs was imposed on Noticee No. 2 under Rule 26(1) of the Central Excise Rules, 2002, for involvement in the clandestine removal of goods. The penalties were based on the shortage noticed during stock-taking and the statements recorded during the investigation.

3. Denial of Cross-Examination:
The appellants argued that the order was passed without proper consideration of their contentions and without allowing cross-examination of the transporters and employees of M/s Shiv Shakti Sponge Iron Pvt. Ltd. The Commissioner denied the cross-examination without providing cogent reasons, which the appellants claimed violated principles of natural justice. They relied on case laws such as Andaman Timber Industries Vs. CCE, Kolkata-II and Jindal Drugs Pvt. Ltd. Vs. Union of India, which emphasize the necessity of cross-examination for a fair trial.

4. Allegation of Clandestine Removal:
The demand was based on the alleged clandestine removal of MS billets, supported by documents and statements from transporters and company officials. However, the appellants contended that the statements of key witnesses like Mr. Tiwari and Mr. Pande were not reliable as they were not cross-examined. They also argued that the shortage of goods did not necessarily imply clandestine removal, citing the case of Albright Steel Industries Vs. CCE, Raipur, where the absence of corroborative evidence led to the dismissal of similar charges.

5. Evidentiary Value of Statements and Documents:
The appellants challenged the reliance on the statements of Shri Amit Kumar Singh, who had retracted his statement, and the statements of other officials, which they claimed were not conclusive. They argued that the Commissioner failed to provide concrete evidence of clandestine removal, such as transportation receipts or proof of receipt of money for the alleged extra quantity of goods.

6. Adherence to Principles of Natural Justice:
The appellants asserted that the adjudicating authority did not adhere to principles of natural justice by not considering their submissions and case laws cited in their defense. They argued that the order was based on assumptions and lacked substantial evidence, as highlighted in cases like Continental Cement Company Vs. Union of India.

Conclusion:
The Tribunal found that the Revenue's case of clandestine removal was based on assumptions and lacked corroborative evidence. The denial of cross-examination of key witnesses and the absence of concrete proof of transportation and receipt of money for the alleged clandestine removal led to the conclusion that the demand was not sustainable. The impugned order was set aside, and the appeals were allowed with consequential benefits.