2024 (1) TMI 448 - AT - Central Excise

Clandestine removal - Steel Ingots were found short against the recorded stock - several of the relied upon documents were not provided to the Appellant - violation of principles of natural justice - time limitation - HELD THAT - It is observed from the list of documents relied upon at Page 4 of SCN that the tendered documents and joint stock verification Report, etc. are very crucial to show as to how the total quantity of shortages and alleged clearances were arrived at by the Department. Even after 20 years of issue of Show Cause Notice, these documents which should have actually formed part of the Show Cause Notice in the first place, are not available. This shows that no proper care was taken to compile all the documents while issuing the Show Cause Notice. Even after specific directions of the Tribunal, these documents were neither made available to the Appellant nor are they available before us today, to come to a conclusion as to how the shortages and alleged production and removal of clandestine manufactured goods took place. When the alleged value of the clandestinely removed finished goods is more than Rs. 50 crores, it is surprising that no effort whatsoever has been made by the Department to gather any corroborative evidence on relevant issues. The allegation of clandestine manufacturing/clearance is a serious allegation and the Department cannot merely rely on the recorded Statements alone and the quantification cannot be done based on the assumptions and presumptions without proper corroborative evidence in the form of evidence towards purchases, sales, movement of goods, electricity consumption, recorded statements of alleged purchasers and sellers etc. - In the present case, the Department has not made any efforts whatsoever on these counts. Even the recorded statement of Mr. A. K. Ladia has been retracted by him. Thus it loses its evidentiary value as held by Hon ble Chhattisgarh High Court in the case of M/S HI TECH ABRASIVES LIMITED VERSUS THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS RAIPUR 2018 (11) TMI 1514 - CHHATTISGARH HIGH COURT . There are also force in the arguments of the Appellant that though the officials visited the unit of 1st September 2001 and necessary Statements were recorded by September 2002, the Show Cause Notice was issued only on 27/07/2004. This shows that the Department has not issued the Show Cause Notice inspite of having all the documents with them. Time Limitation - HELD THAT - The Tribunals and High Courts have been consistently holding that the Show Cause Notice is to be issued within 6/12 months from the date of visit of officials since that is taken as the date of availability of knowledge to the Department. Therefore, the Show Cause Notice issued on 27/07/2004 is also barred by time. The Appeal allowed both on merits as well as on account of limitation.

Summary

Issues Involved:
1. Non-provision of relied upon documents.
2. Validity of the statement of clandestine removal.
3. Method of stock taking and corroborative evidence.
4. Delay in issuing the Show Cause Notice.

Summary:

Non-provision of Relied Upon Documents:
The Tribunal noted that the Adjudicating Authority did not provide all the documents to the Appellant despite the Tribunal's earlier directive. The Appellant had filed a letter on 13/02/2008 stating that the required documents were not made available, which was ignored by the Adjudicating Authority. This non-compliance with the Tribunal's directions rendered the Denovo Proceedings flawed.

Validity of the Statement of Clandestine Removal:
The Appellant argued that the statement of Mr. A. K. Ladia, recorded on 01/09/2001, was retracted on 05/09/2001, claiming it was made under duress. The Tribunal agreed that in view of the retraction, the statement held no evidentiary value.

Method of Stock Taking and Corroborative Evidence:
The stock taking was done visually without actual weighment, making the shortage findings unreliable. The Tribunal emphasized the lack of corroborative evidence such as records of raw material purchases, sales, electricity consumption, or movement of vehicles. The Department's reliance on assumptions without concrete evidence was insufficient to prove clandestine removal.

Delay in Issuing the Show Cause Notice:
The Tribunal found the Show Cause Notice issued on 27/07/2004, more than two years after the initial search and statement recordings, to be unjustifiably delayed. The Department had all relevant documents by April 2002, and the delay rendered the demand barred by limitation.

Conclusion:
The Tribunal set aside the demand on both merits and limitation, highlighting the Department's failure to provide necessary documents, reliance on retracted statements, lack of corroborative evidence, and unjustifiable delay in issuing the Show Cause Notice. The appeal was allowed with consequential relief to the Appellant.