2019 (4) TMI 1685 - AT - Central Excise

Clandestine removal - reliability of statements - cross-examination of persons - primary contention of the assessee is the denial of cross-examination of the dealers whose statements were made use by the Revenue in order to fasten the duty liability - Section 36 B of the Central Excise Act - HELD THAT - It is not the cases of the Revenue that the appellant s electricity consumption was not disclosed or that the excess consumption of electricity was discovered by the State Electricity Board for which the appellant was fastened with penalty, etc. Moreover, apart from merely alleging that the excess usage of electricity had resulted in more production which was not recorded, the Revenue has not led any positive evidence to prove that the appellant did receive or found with cash which was also not recorded. There is also an allegation with regard to purchase of excess raw materials but, however, there is no positive evidence placed on record as to the excess/un-recorded cash found to have been used for the purchase of alleged excess raw materials nor is there any evidence or even reference to entry of vehicles/trucks into the factory premises for loading of goods thereon, security gate records, statement of lorry drivers, etc., and therefore, the other evidences are also of no weightage to conclusively hold that there is clandestine activities. It is the settled position therefore that a statement which is sought to be used against a person shall be given to the person against whom it is being used, that person should also be provided with an opportunity of cross-examining such other person which is also the requirement of law as well as natural justice. Even though, the cross-examination was sought for, the Revenue not only denied and rejected the appellant s request, but also made use of such un-corroborated statements to demand duty on the allegations of clandestine removal which is not permissible. Appeal allowed - decided in favor of appellant.

Summary

Issues: Allegation of clandestine removal of excisable goods without payment of duty, denial of cross-examination of dealers, compliance with Section 36 B of the Central Excise Act regarding reliance on floppy disk and hard disk printouts.

Allegation of Clandestine Removal:
The Revenue conducted a search at the appellant's premises and issued a Show Cause Notice alleging clandestine removal of excisable goods without payment of duty. The notice mentioned various annexures, hard disk and floppy disk recoveries, and statements of individuals. The Order-in-Original highlighted discrepancies in electricity consumption, printouts from disks, balance sheet differences, lack of proper documentation, and alleged involvement of the Managing Director. The appellant denied the allegations and requested cross-examination of relevant persons.

Cross-Examination Denial:
The appellant contested the denial of cross-examination of dealers whose statements were crucial for establishing duty liability. The appellate authority rejected the appeal based on this issue. The primary contention was the violation of natural justice by not allowing cross-examination of key witnesses relied upon by the Revenue.

Compliance with Section 36 B:
The appellant raised concerns regarding the Revenue's failure to obtain a certificate as required by Section 36 B of the Central Excise Act when relying on printouts from floppy and hard disks as evidence. The absence of this certificate rendered the documents legally insignificant. The Tribunal upheld the appellant's argument, citing a precedent and emphasizing the statutory necessity of such a certificate for evidentiary value.

Judgment Summary:
The Tribunal analyzed the evidence presented by the Revenue, including electricity consumption data, documentation discrepancies, and statements of dealers. It found the lack of substantial evidence to support the allegations of clandestine activities. The Tribunal emphasized the importance of allowing cross-examination as per legal requirements and previous judicial decisions. Additionally, the Tribunal highlighted the necessity of complying with statutory provisions, such as obtaining certificates for digital evidence. Due to the absence of crucial evidence and procedural lapses, the Tribunal set aside the impugned orders and demands, allowing the appeals with consequential benefits.