2022 (5) TMI 646 - AT - Central Excise

Violation of principles of natural justice - Evasion of duty - clandestine removal - remand of the case - Tribunal has committed an error of law by remitting the matter back to the Commissioner for denovo inquiry on the issue concerning evasion of duty without discussion of evidence available on record which prevailed upon the Commissioner to drop this part of the demand - reliability upon the admission made by the AGM of the assessee company to sustain the order of imposition of duty - HELD THAT - It is found from the allegations in the show cause notice that the said demand of Rs.9, 94, 65,997/- was proposed on the basis of the bilty nakal register (recovered from the two transporters) and on the basis of the statement of the two officers of the respondent assessee namely Shri S. N. Jha, AGM (Excise) and R.K. Bhadoria, AGM (Logistics) - Hon ble High Court in its order have categorically held that the statement of the said two officers cannot be relied upon by Revenue for want of fulfilment of the requirements of Section 9D of the Act. The Hon ble High Court also took notice of the fact that the said Officers have retracted their statements soon thereafter and also not supported their statement given at the time of investigation, in their cross-examination. On a careful examination of the statements and cross-examination, it is found that there is no categorical admission of clandestine removal as alleged by the Revenue. It is also found that all these persons had retracted their statement within a period of few weeks/ months of the recording of their initial statement by the officers during investigation. Thus, these statements discussed hereinabove, do not support the allegations of clandestine removal for the alleged duty evasion of Rs.9,94,65,997/-. The charge of clandestine removal and duty evasion is a serious charge having civil consequences upon the assessee. Such charge cannot be confirmed unless there is sufficient corroborative evidence which leads to the inevitable conclusion of clandestine removal - In the facts of the present case, it is found that in absence of the relevant inputs necessary for production for the alleged quantity removed clandestinely, namely raw materials, electricity, labour etc., the condition precedent of manufacture is not established and in absence of such material evidence, only on the basis of third party evidence the charge of clandestine removal is not sustainable. Thus, the presumption as to the truth and evidentiary value of the documents is available to the Revenue, if the document relied upon is recovered and seized from the premises of the assessee. However, where any incriminating documents are recovered from the premises of third party, such third party should also be jointly prosecuted by being added as co-noticee in the show cause notice. The clandestine removal is a serious charge and needs to be established with cogent evidence. Learned Commissioners order as far as it relates to the dropping of demand of duty for Rs.9,94,65,997/-, needs no intervention - the appeal filed by Revenue is liable for dismissal - appeal dismissed - decided against Revenue.

Issues Involved:
1. Dropping of demand of Rs. 9,94,65,997/- by the Commissioner.
2. Confirmation of demand of Rs. 1,51,44,426/- along with equal penalty under Section 11AC of the Act.
3. Confiscation of land, building, plant, and machinery under Section 173Q of Central Excise Rules, 1944 read with Rule 25 of Central Excise Rules, 2002.
4. Seizure and release of Rs. 44,45,000/- in cash from a sister unit.
5. Imposition of penalty on Shri N. K. Gupta, Vice President of M/s Prakash Industries Limited, New Delhi under Rule 26 of Central Excise Rules, 2002.
6. Appeals filed by the appellant-assessee and Revenue before the Tribunal and the High Court.

Detailed Analysis:

1. Dropping of demand of Rs. 9,94,65,997/-:
The Commissioner dropped the proposed demand of Rs. 9,94,65,997/- based on the 'bilty nakal register' seized from transporters, which lacked corroborative evidence such as clandestine receipt of raw materials, excess electricity consumption, and receipt of sale proceeds. The Hon'ble High Court upheld this decision, stating that the Tribunal's remand for denovo inquiry was unnecessary as no new evidence was presented. The Tribunal's reliance on the 'bilty nakal register' alone, without corroborative evidence, was insufficient to establish clandestine removal.

2. Confirmation of demand of Rs. 1,51,44,426/-:
The Commissioner confirmed the demand of Rs. 1,51,44,426/- along with an equal penalty under Section 11AC of the Act. This amount was appropriated from the amount paid/debited during the investigation. The Tribunal upheld this confirmation, and the Hon'ble High Court also affirmed it, noting that the findings were based on other incriminating evidence and circumstances, not solely on the statements of the two AGMs.

3. Confiscation of land, building, plant, and machinery:
The Commissioner ordered the confiscation of the appellant's land, building, plant, and machinery under Section 173Q of Central Excise Rules, 1944 read with Rule 25 of Central Excise Rules, 2002, with an option to redeem on payment of a fine of Rs. 25 lakhs. The Tribunal upheld the confiscation but reduced the redemption fine to Rs. 6.25 lakhs.

4. Seizure and release of Rs. 44,45,000/- in cash:
The amount of Rs. 44,45,000/- seized from the sister unit was ordered to be released along with interest earned on it. However, a penalty of Rs. 5 lakhs was imposed on Shri N. K. Gupta, Vice President of M/s Prakash Industries Limited, New Delhi under Rule 26 of Central Excise Rules, 2002. The proposed penalty on Shri V. K. Gupta was dropped.

5. Imposition of penalty on Shri N. K. Gupta:
The Tribunal reduced the penalty on Shri N. K. Gupta to Rs. 1 lakh, and the Hon'ble High Court dismissed his appeal against this reduced penalty.

6. Appeals filed by the appellant-assessee and Revenue:
The appellant-assessee and Revenue preferred appeals before the Hon'ble High Court, which upheld the confirmation of the demand of Rs. 1,51,44,426/-. The High Court set aside the Tribunal's remand order and restored the Revenue's appeal before the Tribunal to decide on the grounds raised by the Revenue against dropping the demand of Rs. 9,94,65,997/-. The Tribunal, after considering the evidence and statements, found no categorical admission of clandestine removal and upheld the Commissioner's dropping of the demand.

Conclusion:
The Tribunal dismissed the Revenue's appeal against the dropping of the demand of Rs. 9,94,65,997/- and upheld the confirmation of the demand of Rs. 1,51,44,426/-. The Tribunal emphasized the necessity of corroborative evidence to substantiate allegations of clandestine removal and noted the lack of such evidence in this case. The appellant-assessee was entitled to consequential relief in accordance with the law.

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