2021 (2) TMI 493 - HC - Central Excise

Clandestine Removal - applicability of principle of beyond reasonable doubt or on the principle of preponderance of probability - cross examination of co-Noticees - absence of cross examination of the co-Noticees - the documentary evidence itself lost its relevance, especially when none of the statements had been retracted by the tenderers - ignoring vital evidences presented by the Department - Penalty. HELD THAT - The Tribunal found that there were serious lacunae in the investigation and analyzed those lacunae in respect of each of the demand. The largest demand was of ₹ 83.09 Lakh and the evidence in respect of the said demand was 136 LRs and daily book register and there was no evidence that so produced that could be relied upon. The investigation was not carried out at the end of the actual transporters and from the testimony of the staff member, who was examined, it transpired that M/s Aishwarya Roadlines, the alleged transporter was mere a booking agent. Demand of ₹ 65.85 Lakh - HELD THAT - The Tribunal found that the documents recovered from the Octroi Department were only photocopies. The statements of transporters were without reference to any documentary evidence. Even the transporters were not allowed to be cross-examined. In respect of the demand of ₹ 55.92 Lakh, no investigation was carried out at the end of the consignee. The demand of ₹ 58 Lakh was based on theoretical calculations. Further the smallest demands of ₹ 4,61,000/- and ₹ 2,40,575/- were also based on statements whose Authors were not offered for cross-examination - The Tribunal also found that the evidence stated to have been recovered from the hard-disks was from the hard-disks which were cloned and showed loss of master boot record. The production of log-sheet so printed from cloned hard-disks, which the Tribunal rightly found could not be relied upon. The Tribunal also referred to Section 36-B of the Act of 1944 in respect of cloning and re-cloning of the hard-disks. It cannot be said that the assessment of evidence was perverse. Even assuming the burden was not stringent, even that burden was not satisfactorily discharged by the Appellant - Rest of the issues are purely questions of fact. Therefore, the issues raised and the questions framed in this Appeal are not questions of law. Penalty - HELD THAT - As the demands were rightly not established against the Respondent, the issue of penalty does not survive. Appeal dismissed - decided against Revenue.

Summary

Issues:
Amendment of appeal to restrict it to one respondent, Questions of law regarding clandestine clearance of excisable goods, Assessment of evidence by the Tribunal, Analysis of lacunae in investigation, Burden of proof, Cross-examination of witnesses, Evidence from hard-disks, Penalty imposition.

Amendment of Appeal:
The appellant sought leave to amend the appeal to restrict it to one respondent as separate appeals were already filed for other respondents. The court granted leave to delete the other respondents from the array of parties, and the amendment was to be carried out immediately.

Questions of Law Regarding Clandestine Clearance:
The appeal challenged the order passed by the Customs, Excise and Service Tax Appellate Tribunal regarding clandestine clearance of excisable goods without payment of Central Excise duty. The court framed questions of law related to the burden of proof required to establish such clearances, the necessity of cross-examination of co-noticees, and the relevance of documentary evidence in the absence of cross-examination.

Assessment of Evidence by the Tribunal:
The appellant contended that the Tribunal's assessment of evidence was incorrect, placing an unduly stringent burden on the appellant to prove clandestine removal of goods. The respondent argued that the appeal raised only questions of fact, not law.

Analysis of Lacunae in Investigation:
The Tribunal found serious deficiencies in the investigation, particularly in the evidence presented for various demands. It noted shortcomings in the evidence related to demands ranging from large sums to smaller amounts, highlighting issues such as reliance on photocopies, lack of documentary evidence, and theoretical calculations without proper investigation.

Burden of Proof and Cross-Examination:
The Tribunal emphasized the degree of proof required, citing precedents and the importance of allowing cross-examination of witnesses. It found that statements used against the respondent were from persons not allowed to be cross-examined, leading to serious lacunae in the evidence presented.

Evidence from Hard-Disks:
The evidence recovered from hard-disks was found to be unreliable as the hard-disks were cloned and showed discrepancies. The Tribunal referred to legal provisions regarding cloning and re-cloning of hard-disks, concluding that the evidence from cloned hard-disks could not be relied upon.

Penalty Imposition:
Given the findings that the demands were not established against the respondent, the issue of penalty imposition did not survive, and the appeal was dismissed accordingly. No costs were awarded in the case.