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2025 (2) TMI 1053 - AT - Central ExciseClandestine removal - Fraudulent availment of CENVAT Credit - Area based exemption - it is alleged that the claim of procurement of mentha oil by the manufacturers situated in Jammu Kashmir and North East were bogus - denial of cross-examination of witnesses - violation of princiles of natural justice - HELD THAT - It is found that the evidence available in this regard has already been discussed by the Tribunal in the series of cases and it has been concluded that the evidences are not enough to sustain the demands. When the allegation of bogus procurement of raw material manufacture and clearance by the Jammu based units cannot be established allegation of bogus procurement from these units by Meerut based manufacturers cannot be sustained. The allegation leveled against the appellants do not sustain. The averment by the learned Authorized Representative that some of the supplies made may be fake is of no help at this stage. It was open to the Department to collect all the evidences and make precise allegations while issuing the Show Cause Notice. The bus having been missed Revenue cannot open a new front to continue the litigation on the facts and records which were not part of the impugned proceedings. The charge of clandestine removal is a grave one. It has to be leveled with accuracy though mathematical precision cannot be expected. Co-ordinate Bench of the Tribunal in the matter of Nova Petrochemicals v. CCE Ahmedabad-II 2013 (11) TMI 626 - CESTAT AHMEDABAD held There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Procurement and Fraud Allegations Relevant legal framework and precedents: The appellants were accused of fraudulent procurement of mentha oil from non-existent suppliers in Jammu & Kashmir and North East, impacting their eligibility for CENVAT credit and rebates. Precedents from cases like Arora Aromatics and Neeru Enterprises were considered, where similar allegations were dismissed due to lack of concrete evidence. Court's interpretation and reasoning: The Tribunal found that the Department's allegations were based on assumptions and lacked substantial evidence. Previous Tribunal decisions consistently set aside similar demands, emphasizing the need for concrete and tangible evidence. Key evidence and findings: The appellants provided documentary evidence, including purchase invoices, toll post entries, and verification reports from jurisdictional authorities, which were not adequately considered by the Department. Application of law to facts: The Tribunal applied the principles from previous cases, highlighting the absence of concrete evidence to support the Department's claims of fraudulent procurement and manufacture. Treatment of competing arguments: The Department's argument that some invoices might be fake was dismissed due to lack of specific evidence. The Tribunal emphasized the need for precise allegations and evidence. Conclusions: The Tribunal concluded that the allegations of fraudulent procurement were not substantiated by evidence, and the demands could not be sustained. 2. Violation of Natural Justice Relevant legal framework and precedents: The appellants argued that the denial of cross-examination violated principles of natural justice. The Tribunal referenced the case of Jindal Drugs, which emphasized the importance of allowing cross-examination when requested. Court's interpretation and reasoning: The Tribunal found that the denial of cross-examination was a significant procedural lapse, as it deprived the appellants of the opportunity to challenge the evidence against them. Key evidence and findings: The Tribunal noted that the statements of witnesses were relied upon without allowing cross-examination, undermining the credibility of the evidence. Application of law to facts: The Tribunal applied principles of natural justice, concluding that the procedural deficiency warranted setting aside the impugned order. Treatment of competing arguments: The Department's defense of procedural adherence was insufficient to counter the established principles of natural justice. Conclusions: The Tribunal held that the denial of cross-examination violated natural justice, further weakening the Department's case. 3. Limitation and Timeliness of Demands Relevant legal framework and precedents: The appellants contended that the demands were time-barred, referencing cases like Madhus Garage Equipments and Priya Blue Industries. Court's interpretation and reasoning: The Tribunal agreed that the demands were issued beyond the permissible time frame, rendering them unsustainable. Key evidence and findings: The Show Cause Notices were issued long after the relevant period, with no justification for the delay. Application of law to facts: The Tribunal applied the legal principles regarding limitation, determining that the demands were indeed time-barred. Treatment of competing arguments: The Department's justification for the delay was insufficient to overcome the clear statutory limitations. Conclusions: The Tribunal concluded that the demands were barred by limitation, further supporting the decision to set aside the impugned order. SIGNIFICANT HOLDINGS The Tribunal's significant holdings include:
Verbatim Quotes of Crucial Legal Reasoning: "The charge of clandestine removal has to be based on concrete and tangible evidence and not on inferences involving unwarranted assumptions." "Without bringing any concrete evidence against the appellant on record, the proceedings against the appellant are not sustainable." "The denial of cross-examination violates principles of natural justice, as it deprives the appellants of the opportunity to challenge the evidence against them." The Tribunal set aside the impugned order and allowed the appeals, providing consequential relief to the appellants.
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