2019 (4) TMI 1459 - AT - Central Excise

Clandestine removal - steel wire - the impugned order is based on the presumption and assumption and is contrary to the evidence on record - HELD THAT - It is on record the recovery of the weighment registers were not made under Panchnama and the reliance of same cannot be placed for alleging the clandestine removal against the appellant. It is also held by the Adjudicating Authority these weighment slips were recovered from gate office of the appellant which has been denied by the appellant. In absence of the assumption of the said document without proper panchnama reliance cannot be placed on said record - the appellant has categorically desired to have the cross examination of rawmaterial supplier and the incharge of the weighbridge, which had been denied by the Adjudicating Authority. No case has been made against the appellant for want of (i) proper investigation (ii) denial of cross examination asked by the appellant as per section 9D (1) of the Central Excise Act (iii) reliance on the third party evidence without any corroboration with additional evidence (iv) non-reliance of on the investigation report submitted by the Range Superintendent by the order of Adjudicating Authority - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of clandestine removal of goods.
2. Basis of duty demand and penalty.
3. Verification of weighment slips and related records.
4. Denial of cross-examination.
5. Applicability of excise duty on wire drawing.
6. Limitation period for issuing Show Cause Notice.
7. Imposition of penalty on individuals.

Detailed Analysis:

Allegation of Clandestine Removal of Goods:
The appellant was accused of clandestinely clearing 1,60,420 MT of excisable finished goods without payment of duty, based on discrepancies between weighment slips and the RG-1 register. The Commissioner confirmed the duty demand of ?81,23,530 and imposed an equal penalty under Section 11AC of the Central Excise Act, 1944.

Basis of Duty Demand and Penalty:
The duty demand and penalty were based on 229 weighment slips from M/s Om Dharam Kanta, marked "MW," which were compared with the RG-1 register. Only 51 of these slips were recorded in the RG-1, leading to the allegation of clandestine removal. The appellant argued that the Commissioner’s findings were based on assumptions and lacked concrete evidence.

Verification of Weighment Slips and Related Records:
The appellant contended that the Commissioner failed to consider the verification report by the Range Superintendent, which found only three discrepancies, all of which were explained by the appellant. The Commissioner also disregarded evidence related to group companies and failed to authenticate the weighment slips properly.

Denial of Cross-Examination:
The appellant was denied the opportunity to cross-examine the raw material suppliers and the weighbridge in-charge, violating the principles of natural justice as per Section 9D(1) of the Central Excise Act. This was a significant procedural lapse.

Applicability of Excise Duty on Wire Drawing:
The appellant argued that during the relevant period, no excise duty was leviable on wire drawing from wire rods, citing the Supreme Court’s decision in CCE vs. Technoweld Industries and CBEC Circular No. 720/36/2003-CX. The Commissioner did not address this issue in the impugned order.

Limitation Period for Issuing Show Cause Notice:
The Show Cause Notice was issued after more than two years, making it time-barred. The appellant highlighted this as a procedural flaw.

Imposition of Penalty on Individuals:
The appellant argued that there was no basis for imposing penalties on the Managing Director, Authorized Signatory, and the proprietor of Santosh Roadways under Section 26 of the 2002 Rules.

Tribunal's Findings:
1. Lack of Proper Investigation: The recovery of weighment slips was not conducted under a proper Panchnama, making the evidence unreliable.
2. Denial of Cross-Examination: The denial of cross-examination was a violation of natural justice.
3. Reliance on Third-Party Evidence: The reliance on third-party evidence without corroboration was improper.
4. Non-Consideration of Verification Report: The verification report by the Range Superintendent, which found only three discrepancies, was not considered.
5. Excise Duty Applicability: The Commissioner failed to address the issue of excise duty applicability on wire drawing.
6. Time-Barred Notice: The Show Cause Notice was issued beyond the permissible period, making it time-barred.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential benefits. The Tribunal criticized the Adjudicating Authority for not applying due diligence and for procedural lapses.

Operative Part:
The order was pronounced in open court, setting aside the impugned order and allowing the appeal with consequential benefits if any.

← Previous Next →