2022 (5) TMI 473 - AT - Central Excise

Clandestine Removal - MS TM Bars - reliability of statements of appellants - third party evidences - levy of penalty upon the present appellants holding that all of them knew and had reason to believe that they were dealing with the goods which were liable for confiscation for want of deposit of duty for the same - HELD THAT - The Original Adjudicating Authority Commissioner (A) also relying upon the statements of present appellants, have held that the statements are sufficient admission about the quantities of the MS Ingots, MS Rolls to be sold to M/s. Bhiwadi Rolling Mills through M/s. Rathi Bars Ltd. Without issue of invoice and without payment of duty. Accordingly the allegations of clandestine removal of the goods by M/s. Rathi Bars Ltd. have been confirmed and that the duty was demand was confirmed against the company and the penalty has been imposed upon the present appellants, they being the employee / commission agents for the company. But the allegations of clandestine removal are serious allegations which cannot sustain unless there is clinching evidence. Reverting back to the facts of the present case it is observed that except for the statement of the present appellants there is no investigation on part of the Department either from anyone who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing of excisable goods. Not only this, it is observed that the investigation initially began with the search in the premises of M/s. Bhiwadi Rolling Mills and the show cause notice has been issued based on the documents (soft as well as hard) as were recovered from the factory of M/s. Bhiwadi Rolling Mills as well as the residential premises of its Manager, Sh. Ankit Keriwal - Apparently and admittedly no search was ever got conducted in the premises of M/s. Rathi Bars Ltd. No document has been recovered from the premises of the said company or from the premises of either of these appellants - In such circumstances, it stands apparently clear that the investigation against the present appellants got initiated based upon the third party evidence and it got confirmed also based on third party evidence i.e. the documents as were recovered from the premises of M/s. Bhiwadi Rolling Mills. Since the sole challenge to the order is its reliance upon third party evidence, it is necessary to check the evidentiary value of the third party evidence - Apparently and admittedly there is no evidence of bifurcating the said consignment and bifurcation of the proposed / confirmed demands only on M/s. Rathi Bars Ltd. This lacuna on part of the investigation also hits the very basis of allegations and the demand confirmed against the appellant. In absence of the said corroborating evidence and in the light of apparent fact that the appellants have time and again been requesting for the witnesses to be cross examined but the request had been turned down, it is clear that violation of section 9 D of the Central Excise Rules 2002 is very much apparent on the record. Commissioner (A) has though held that since the witnesses have sufficiently admitted about the alleged guilt the cross examination is not required, the legal concept applied is absolutely correct. The submissions on behalf of appellant is not convincing that since main party has been given a discharge certificate under SVDRL Scheme the penalty on appellants be set aside - it is held that there is no cogent evidence on record to proceed against the appellant so as to penalise them. Hence, it is held that the authority below has wrongly confirmed the demand. Question of imposition of penalty on the present appellants in the given circumstances does not at all arise. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Clandestine removal of goods without payment of excise duty.
2. Reliance on third-party evidence.
3. Violation of Section 9D of the Central Excise Act.
4. Imposition of penalties on employees and commission agents.

Issue-wise Detailed Analysis:

1. Clandestine Removal of Goods Without Payment of Excise Duty:
The Department alleged that M/s. Rathi Bars Ltd. clandestinely removed goods worth Rs. 26,45,487/- without paying excise duty. This conclusion was based on documents and statements obtained from M/s. Bhiwadi Rolling Mills and its Manager. The Original Adjudicating Authority confirmed these allegations, imposing penalties on the company and its employees/commission agent. However, the Tribunal noted that allegations of clandestine removal are serious and require "clinching evidence." The Tribunal referenced the case of Continental Cement Company vs Union of India, emphasizing that demands cannot be confirmed solely on presumptions and assumptions without corroborative evidence of excess production, raw material purchase, transport details, sale proceeds, and power consumption.

2. Reliance on Third-Party Evidence:
The investigation against the appellants was initiated based on documents recovered from M/s. Bhiwadi Rolling Mills, not from M/s. Rathi Bars Ltd. or the appellants' premises. The Tribunal highlighted that reliance on third-party documents alone, without corroborative evidence, is insufficient to establish clandestine removal. The Tribunal cited Bajrangbali Ingots & Steel Pvt. Ltd. vs. CCE, Raipur, which held that findings of clandestine removal cannot be upheld based on third-party documents unless supported by tangible evidence of clandestine manufacture and removal.

3. Violation of Section 9D of the Central Excise Act:
The appellants argued that their statements were wrongly relied upon without cross-examination, violating Section 9D of the Central Excise Act. The Tribunal observed that the appellants had repeatedly requested cross-examination of witnesses, which was denied. The Tribunal found that the statements did not contain clear admissions of clandestine removal and were thus wrongly considered as admissions of guilt. The Tribunal emphasized that the burden of proving malafide conduct lies with the one alleging it, referencing Uniworth Textiles Ltd. vs. CCE Raipur.

4. Imposition of Penalties on Employees and Commission Agents:
The appellants contended that penalties imposed on them should be set aside, particularly since M/s. Rathi Bars Ltd. had obtained a discharge certificate under the Sabka Vishwas Legacy Dispute Redressal Scheme 2019. While the Tribunal did not accept this argument, it concluded that there was no cogent evidence to penalize the appellants. The Tribunal found that the adjudicating authorities had wrongly confirmed the demand and imposed penalties based on insufficient evidence.

Conclusion:
The Tribunal set aside the order under challenge, concluding that the allegations of clandestine removal were not substantiated by sufficient evidence. The penalties imposed on the appellants were also set aside, and all appeals were allowed. The Tribunal emphasized the need for corroborative evidence and adherence to legal procedures, including the right to cross-examination, to uphold allegations of clandestine removal.