2022 (12) TMI 452 - AT - Central Excise

Clandestine manufacture and or removal - Goa brand gutkha - third party statements and evidences - admissible evidences or not - gross violation of principles of natural justice - HELD THAT - The whole case of Revenue is made on the basis of the third party statements and some records and a note book recovered from the premises of M/s. G.M. Carriers, Bhiwandi. The entries in the said note book (private documents) are purported to have been made by one Mr. Javed Gamir Sheikh, an employee of M/s.G.M. Carriers, Bhiwandi, as stated by Mr. Javed Gamir Sheikh in his statement. He had deposed that these contain details of goods received from Jodhpur, both accounted and unaccounted. Mr. Javed Gamir Sheikh was not produced for cross examination by the Revenue, statement of whom was relied upon, who was the person, who claimed to have made the entries in abovementioned resumed note book and such entries were the basis for quantifying and raising the demand against the appellant. The partner of M/s. G.M. Carriers, Bhiwandi, Mr. A.A. Patni, in his cross examination has denied the maintenance of any such note book by them and has further contradicted the statement of Mr. Javed Gamir Sheikh, their employee. Thus, the said note book is not a reliable piece of evidence and further, the statement of Mr. Javed Gamir Sheikh is not an admissible evidence, as he was not produced for cross examination in violation of Section 9 D of the Act. There are no evidence of clandestine manufacture and removal of Goa brand gutkha has been found. The transporters of the appellant, M/s. KGN Transporter has not been investigated, at any stage. Further, admittedly, only minor /negligible variations have been found in the stock of the raw materials and finished goods in the course of inspection at the factory at Jodhpur. Admittedly, the documents resumed from Mr. Suresh B. Jajra are not related to this appellant but are related to other manufacturer like M/s. Royal Marwad, Ahmedabad, M/s. Meenakshi Foods Pvt. Ltd. and others. Such documents have been erroneously relied upon by the Revenue in demanding the duty under dispute. Mr. Suresh Jhajra has not supported the allegation of the Revenue during cross examination. The statements of the witnesses, which were relied upon by the Revenue have not stood the test of cross examination. Thus, the whole demand has been made on assumptions and presumptions. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Evidence of Clandestine Manufacture and Removal
2. Reliability of Third-Party Statements and Documents
3. Violation of Principles of Natural Justice
4. Cross-Examination of Witnesses
5. Relevance and Inspection of Relied Upon Documents
6. Penalty on Director

Detailed Analysis:

1. Evidence of Clandestine Manufacture and Removal:
The appellant argued that no evidence of clandestine manufacture or removal of Guthkha from their factory was found during the search. There was no excess or shortage of raw materials or finished goods, and no unaccounted transportation of goods was unearthed. The investigation did not reveal any unaccounted receipt of raw materials or packing materials required for clandestine manufacture and sale. The documents recovered pertained to other manufacturers and not the appellant's factory. The tribunal found that no evidence of clandestine manufacture and removal of Goa brand Guthkha was present, and the transporters of the appellant were not investigated. Only minor variations were found in the stock during the inspection.

2. Reliability of Third-Party Statements and Documents:
The Revenue's case relied heavily on third-party statements and documents, including a note book recovered from M/s. G.M. Carriers, Bhiwandi. The entries in this note book were purportedly made by Mr. Javed Gamir Sheikh, an employee of M/s. G.M. Carriers. However, Mr. Sheikh was not produced for cross-examination, and his statement was contradicted by his employer, Mr. A.A. Patni, who denied maintaining such a note book. The tribunal held that the note book and Mr. Sheikh's statement were not reliable pieces of evidence. Additionally, the documents recovered from Mr. Suresh B. Jajra were related to other manufacturers and not the appellant, making them erroneously relied upon by the Revenue.

3. Violation of Principles of Natural Justice:
The appellant contended that the impugned order was passed in gross violation of principles of natural justice. The Commissioner relied on communications from the investigating agency without furnishing copies to the appellant, thus violating the principles of natural justice. The tribunal agreed, noting that the findings were based on assumptions and presumptions without providing the appellant an opportunity to inspect the documents or cross-examine the witnesses properly.

4. Cross-Examination of Witnesses:
The appellant emphasized that crucial witnesses, including Mr. Javed Gamir Sheikh, were not produced for cross-examination. The cross-examination of other witnesses revealed contradictions and discredited the evidence relied upon by the Revenue. The tribunal found that the statements of the witnesses did not stand the test of cross-examination, further weakening the Revenue's case.

5. Relevance and Inspection of Relied Upon Documents:
The appellant argued that they were not provided with copies of crucial documents relied upon in the show cause notice, nor were they allowed to inspect these documents. The tribunal found that the Commissioner failed to appreciate the importance of these documents and did not provide the appellant an opportunity to peruse and understand them, thus violating the principles of natural justice.

6. Penalty on Director:
The appellant argued that no penalty could be imposed on the Director if the manufacturer was not held liable for duty and penalty. The tribunal, having set aside the demand and penalties against the appellant, implicitly agreed that the penalty on the Director was also unjustified.

Conclusion:
The tribunal allowed the appeals, setting aside the impugned order and entitling the appellants to consequential benefits. The judgment emphasized the lack of reliable evidence, the violation of principles of natural justice, and the failure of the Revenue to substantiate its allegations with concrete proof.

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