2024 (1) TMI 449 - AT - Central Excise

Clandestine removal of manufactured products between the period 01.04.2012 and 31.08.2012 - Demand based on documents allegedly recovered from third party like M/s. Vikram Steel - uncorroborated testimony of some witnesses - denial of cross-examination - violation of principles of natural justice - HELD THAT - First, on the point of the observation that admission needs no further prove, as has been held by the Hon'ble Supreme Court in System Components case 2004 (2) TMI 65 - SUPREME COURT that is being relied upon by this Tribunal in the case of Gulabchand Silk Mills 2005 (3) TMI 192 - CESTAT, BANGALORE , there is a clear finding that recovery of unaccounted goods was made and as because clandestine clearance is very difficult to establish in linking each chain of the circumstances admission of the person involved, in view of provision contained in Section 56 of the Indian Evidence Act, is to be taken as best piece of evidence to establish guilt of the delinquent but in the instant case, no recovery of any goods had taken place to apply the judgment to the facts of this case. Second, what is required to be discussed here is that Appellant was denied with the opportunity of cross examination of the witnesses basing on whose statements, demand was confirmed and in this connection, it would be of great importance to reproduce para 6 of the judgment of the Hon'ble Supreme Court passed in the case of Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II 2015 (10) TMI 442 - SUPREME COURT that explains the basic requirement of cross examination and states the order to be a nullity if principle of natural justice is violated in denying cross examination. The third important point that needs consideration and analysis is the retracted statement of the Director. The contention of the Appellant is that under coercion and duress statement of the Director was recorded. This may be true in most of the cases in which investigation is carried out by agencies who have authority also to prosecute the offenders, for which the statement recorded before those authority could not be taken as a statement given voluntarily or on free will despite the fact that Section 25 of the Indian Evidence Act would not applied to the statement recorded by Revenue Officials, as they are treated at par with Police. Retraction made subsequent to such statement could be bona fide or could be made after thought but again communicating the said retraction to the investigating authority is fraught with danger and is beyond the competency and courage of an ordinary human being to venture into - Apart from confessional statement, nothing noticeable is found in the order of the Commissioner (Appeals) that would substantiate the allegation and discard the order passed by the Adjudicating Authority. The appeal is allowed and the order passed by the Commissioner of GST Central Excise (Appeals) Nashik is hereby set aside.

Summary

Issues involved:
Confirmation of duty demand, penalty, and interest against the Appellant by the Commissioner of GST & Central Excise (Appeals) on the ground of clandestine removal of manufactured products.

Summary:

Issue 1: Allegations of clandestine removal

The Appellant, a manufacturer of MS structural items, was accused of clandestine removal of goods based on information gathered by the DGCEI. The investigation concluded with a show-cause notice, which was adjudicated by the Assistant Commissioner absolving the Appellant. The Respondent challenged this decision before the Commissioner (Appeals), resulting in the confirmation of demand, interest, and penalty. The Appellant contested the legality of this decision, highlighting the lack of evidence supporting the allegations.

Issue 2: Lack of evidence and procedural irregularities

During the appeal, the Appellant's counsel argued that the demand was confirmed solely based on uncorroborated documents and witness testimonies, without any physical evidence from the Appellant's factory. The Appellant was denied the opportunity for cross-examination, a violation of natural justice. The Commissioner (Appeals) justified the decision by citing the admission of guilt by the Appellant's Director, despite procedural irregularities.

Issue 3: Analysis of contradictory findings

The Tribunal analyzed the contradictory findings in the original and appeal orders. It noted that no recovery of unaccounted goods took place at the Appellant's factory, and the statements relied upon were not substantiated by physical evidence. The Tribunal emphasized the importance of cross-examination and the unreliability of statements obtained under coercion. Ultimately, the Tribunal allowed the appeal, setting aside the Commissioner's order.

Conclusion:

The Tribunal allowed the appeal, setting aside the order of the Commissioner of GST & Central Excise (Appeals) and providing consequential relief to the Appellant. The decision was based on the lack of concrete evidence supporting the allegations of clandestine removal and procedural irregularities in the adjudication process.