2022 (9) TMI 428 - AT - Central Excise

Clandestine removal - corroboration of the details of alleged clandestine clearances found in the diaries of the brokers with the consumption of electricity - demand on the basis of diaries of brokers - separate demand on the basis of these weighment slip recovered from Juvansinh Jeshabhai Solanki - HELD THAT - It is admitted fact of both sides that most of the investigation in the present case are not only identical but common to the case of SHRI HARI STEEL INDUSTRIES, NAGJIBHAI JIVRAJBHAI DODIYA AND HIMANSHUBHAI NANDLAL JAGANI VERSUS C.C.E. S.T. -RAJKOT AND C.C.E. S.T. -BHAVNAGAR 2022 (8) TMI 1251 - CESTAT AHMEDABAD . It is a fact that in case of Shri Hari Steel Industries also no shortage or excess were found in the factory premises, no investigation at the buyer s end was conducted and no investigation in respect of Electricity raw material etc. was conducted. It is also a fact that in case of Shri Hari Steel Industries no examination in chief or cross examination was done. In these circumstance the decision of Shri Hari Steel Industries would be squarely applicable in respect of the demand raised on the basis of the diaries recovered from the brokers. Coming to the evidence collected from the residence of Juvansinh Jeshabhai Solanki, it is seen that the said slip are reproduced in the impugned order in para 3.4.8. It is seen from the said slips that there is no mention of the manufacturer s name and therefore there is no direct correlation with the main noticee in this case, namely Pure Alloys Limited. Moreover, it is seen that there was no examination in chief or cross examination done and therefore, the only link between these weighment slips and the alleged manufacturer namely Pure Alloys, is the statements of Juvansinh Jeshabhai Solanki and Nareshbhai Ramsang Rana which cannot be admitted as evidence in absence of Examination under Section 9D of Central Excise Act. In these circumstances, no penalties in respect of these weighment slips also can be imposed. The penalties imposed against various appellants are set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Reliance on third-party evidence (broker diaries and statements) for clandestine removal.
2. Lack of corroborative evidence (shortage of goods, buyer's end investigation, raw material procurement, electricity consumption).
3. Admissibility and reliance on statements without cross-examination.
4. Specific evidence (weighment slips) recovered from an employee's residence.

Issue-wise Detailed Analysis:

1. Reliance on Third-Party Evidence:
The appeals were filed by employees and brokers associated with M/s Pure Alloys Limited, with no appeal from the principal noticee. The counsel for the appellants argued that the facts were identical to the case of Shri Hari Steel Industries, where demands were confirmed based on diaries recovered from brokers and statements of employees. The Tribunal had granted the benefit of doubt due to the lack of corroborative evidence. The Authorized Representative agreed that common investigations were conducted but pointed out differences such as weighment slips recovered from an employee's residence.

2. Lack of Corroborative Evidence:
The Tribunal noted that no shortage of goods was found at M/s Pure Alloys' factory, no buyer's end investigation was conducted, and there was no effort to corroborate the alleged clandestine clearances with electricity consumption or raw material procurement. The Tribunal referenced the case of Bansal Castings, emphasizing that reliance on third-party documents without corroborative evidence from the principal noticee is insufficient to establish clandestine removal.

3. Admissibility and Reliance on Statements Without Cross-Examination:
The Tribunal reiterated that statements recorded from brokers and employees cannot be relied upon without cross-examination, as mandated under Section 9D of the Central Excise Act. The Tribunal cited several precedents, including Rama Shyama Papers Ltd. and Emmtex Synthetics Ltd., which held that uncorroborated and uncross-examined statements are not admissible as evidence. The Tribunal emphasized that the onus of proof lies with the Revenue, which cannot be discharged merely on the strength of third-party records without linking the removal of goods from the appellant's premises.

4. Specific Evidence (Weighment Slips) Recovered from an Employee's Residence:
Regarding the weighment slips recovered from Juvansinh Jeshabhai Solanki's residence, the Tribunal observed that these slips did not mention the manufacturer's name, thus lacking direct correlation with Pure Alloys Limited. The statements of employees linking these slips to the alleged manufacturer were not admitted as evidence due to the absence of examination under Section 9D of the Central Excise Act. Consequently, penalties based on these weighment slips were also deemed unsustainable.

Conclusion:
The Tribunal concluded that the penalties imposed based on the broker's diaries and statements, as well as the weighment slips, could not be sustained due to the lack of corroborative evidence and the non-admissibility of statements without cross-examination. The appeals were allowed, and the penalties were set aside.