2019 (4) TMI 1410 - AT - Central Excise

Clandestine removal - Sponge iron - demand based on the documents called weighment slips recovered from the residential premises of third party - opportunity for cross-examination denied - principles of natural justice - HELD THAT - The learned Commissioner has proceeded to confirm the demand on the basis of documents seized from third party, etc. The appellant has successfully rebutted these evidences relied upon by the Commissioner - no investigation has been undertaken by the Revenue towards procurement of additional raw materials clandestinely. No other corroborative documents have been produced. Investigations against the consignees have also not been done before raising demand on the allegation of clandestine clearance. The onus is definitely on the Department to establish manufacture and clearance of such goods and also the receipt of payments. Demand of duty do not sustain - penalties also cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged Central Excise Duty evasion based on shortage of Sponge Iron.
2. Validity of statements obtained under alleged threat and duress.
3. Denial of natural justice in cross-examination of witnesses.
4. Allegation of illicit production of Sponge Iron based on electricity consumption.
5. Confirmation of demand based on documents seized from a third party.
6. Imposition of penalties on the company and connected persons.

Analysis:

1. The case involved allegations of Central Excise Duty evasion against the appellant company based on a shortage of Sponge Iron. The duty evasion was ascertained to a specific amount, and penalties were imposed on various individuals associated with the company.

2. The appellant raised concerns regarding the validity of statements obtained under alleged threat and duress, particularly highlighting the retraction of a statement by an employee due to coercion. Legal precedent was cited to support the argument that such statements obtained under questionable circumstances should not be relied upon.

3. The issue of denial of natural justice was raised concerning the cross-examination of witnesses whose statements were crucial to the case. The appellant argued that the adjudication order should be set aside due to the denial of the opportunity to cross-examine these witnesses, citing legal decisions supporting their position.

4. The allegation of illicit production of Sponge Iron based on electricity consumption was addressed by the appellant, explaining that the high electricity consumption was due to ongoing installation processes rather than clandestine activities.

5. The confirmation of demand was primarily based on documents seized from a third party associated with the company. The Tribunal noted that the appellant successfully rebutted the evidence relied upon by the Commissioner, emphasizing the lack of investigation by the Revenue to establish clandestine activities or procure corroborative evidence.

6. The imposition of penalties on the company and connected persons was deemed unjustified due to the lack of sustained demand for duty payment. The Tribunal concluded that without sufficient investigation and evidence to support the allegations, there was no basis to uphold the penalties imposed.

In conclusion, the Tribunal set aside the impugned order and allowed the appeals, emphasizing the importance of proper evidence and investigation in establishing duty evasion and justifying penalties in such cases.