2019 (5) TMI 218 - AT - Central Excise

Clandestine removal - steel ingots - allegations based on statements recorded - corroborative evidences present or not - opportunity to cross-examine the persons whose statements were recorded - HELD THAT - It is undoubtedly the settled position of law that no uncorroborated statement of a person could be used against any other person and that such other person has every right to cross-examine the person whose statement is being used against him - Here in the case on hand, there is something more than just statements, there are clearly double invoices maintained by the assessee-respondent, carrying the same number but different dates and different values, but accounting only one of the two, which fact was found during the search operation and also resulted in seizure of invoices; that the above discrepancy did result in causing the difference between the physical production quantity vis- -vis the stock register RG-1 which fact also was un-earthed during search and brought on record. Therefore, even if the statement of some of the employees, Managing Director and drivers are to be discarded, still the factual position as to the assessee maintaining duplicate/double invoices of the same number, etc., found and seized, remains un-shaken/unrebutted. The clandestine removal will have to sustain only in respect of duplicate invoices maintained by the assessee and brought on record by the Revenue and the demand, if any, based on the above will have to be re-worked, for which limited reason, the matter is remanded to the file of the adjudicating authority. Appeal allowed in part and part matter on remand.

Summary

Issues: Allegations of clandestine removal of steel ingots based on double/duplicate invoices, lack of corroborative evidence, denial of opportunity to cross-examine witnesses, appeal against Order-in-Original confirming demands, appeal allowed by Commissioner (Appeals), appeal by Revenue.

In this case, the respondent-assessee, engaged in manufacturing Iron and Steel Ingots, was alleged to be involved in clandestine removal of steel ingots based on specific intelligence and investigations by officers of the DGCEI. The Show Cause Notice issued accused the assessee of maintaining double invoices with the same number but different dates and values, leading to discrepancies in stock registers and clearance of goods without payment of duty. The Revenue proposed demands, interest, and penalties on the company and its Managing Director. The assessee responded, denying the allegations and challenging the lack of corroborative evidence and the denial of the opportunity to cross-examine witnesses. The Order-in-Original confirmed the demands, prompting the assessee to appeal to the Commissioner (Appeals), who allowed the appeal citing insufficient evidence and denial of procedural rights. The Revenue, aggrieved by this decision, filed the present appeal.

During the hearing, the Revenue argued that the double/duplicate invoices maintained by the assessee were proof of clandestine activity, as the company failed to rebut this evidence or seek cross-examination of witnesses. The Revenue emphasized the Managing Director's statement as admission of guilt. On the contrary, the Advocate for the assessee supported the Commissioner (Appeals) findings and referenced a relevant decision of the High Court to support the arguments.

The Tribunal acknowledged the legal principle that uncorroborated statements must not be used against a person without the right to cross-examine the witnesses. However, in this case, the existence of double invoices found during the search operation, along with discrepancies in stock registers, provided substantial evidence of clandestine removal. Despite the rejection of witness statements, the Tribunal found the evidence of double invoices unchallenged by the assessee. Therefore, the Tribunal concluded that clandestine removal could only be established concerning the double invoices, and remanded the matter to the adjudicating authority to rework the demand based on this evidence. Consequently, the appeal by the Revenue was partly allowed and partly remanded for further proceedings.