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TMI Blog2017 (11) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of examination of the persons as provided under section 9D of Central Excise Act - In the absence of examination of witnesses and their cross-examination, the statements are inadmissible in evidence and the demand of duty based on such statements alone, in our view, is unsustainable. The allegation of clandestine clearance of goods being a serious one, though not proved to mathematical precision has to be established at least to the extent of balance of probabilities. In the present case, the department has raised the demand on the basis of documents which are mainly third party documents and only on statements of various persons. Therefore, in our view, on the totality of facts and evidence presented, we find that the department has failed to establish the allegation of clandestine clearance as alleged by them in the show cause notice. In such circumstance, the demand raised is unsustainable and requires to be set aside. Appeal allowed - decided in favor of appellant. - E/329 to 331/2005 - Final Order Nos.42823-42825 / 2017 - Dated:- 26-7-2017 - Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) Shri M. Karthikeyan, Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for imposing penalty. The duty amount of ₹ 1,65,000/- already paid by the appellant was proposed to be adjusted. After due process of law, the original authority confirmed the duty demand along with interest and imposed equal penalty besides separate penalty on Shri K. Maheshwaran, Managing Director of the appellant to the tune of ₹ 1,00,000/- and also imposed penalty of ₹ 50,000/- on V.N. Thirumoorthy, proprietor of Murthy Agencies, yarn broker. In appeal, Commissioner (Appeals) upheld the same. Hence these appeals. 2. On behalf of the appellants, learned counsel Shri M. Karthikeyan reiterated the grounds of appeal and made the following submissions:- (a) The major allegation in the show cause notice is that the appellants have cleared cheese yarn in the guise of hank yarn without payment of excise duty. This demand is made on the basis of the invoice under which the appellants have cleared hank yarn to those parties as mentioned in the worksheet. The appellants have actually manufactured hank yarn through their own rolling machines and also through job work. To establish their case, they have produced various corroborative evidences in the form of pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Act. That since these witnesses have not been put for examination and cross-examination, if requested, the statements cannot be relied at all. To canvas this contention, the learned counsel relied upon the judgment of Hon ble High Court of Delhi in the case of J.K. Cigarettes as reported in 2009 (242) ELT 189 (Del.). That in the absence of such examination of witnesses, statements relied upon are not admissible and the demand of duty based on such inadmissible evidence is not sustainable. (k) Shri Murugapan who was cross-examined has categorically stated that they had bought only hank yarn from the appellant and retracted the statement made by him. The demand of duty proposed on the basis of statement recorded by buyers is therefore not at all sustainable since they are not corroborated by any independent evidence. (l) The demand of duty on account of the allegation that cheese yarn was sold as hank yarn to various bogus parties namely M/s. Daivanai Textiles, Erode, M/s. Sree Veeramathamman Yarn Traders, Bhavani and M/s. Rajamani Fabrics, Erode were on the basis of statements recorded from the representatives of the above buyers. He submitted that the demand is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade to M/s. M.M.M. Traders and M.M.M. Co., Vellakoil, it was seen that they were in possession of invoices issued by appellant. The proprietors of these firms have deposed that they have purchased cheese yarn from appellants though invoices were issued for hank yarn. That payments were made through cheques. Another proprietor of Nanda Textiles has deposed that they purchased cheese yarn from appellants and did not receive any bills. That as the payments were made in cash to the appellants, he had not accounted the same in his books.. That by his memory he purchased about 250 bags of 10s OE cheese yarn, during 2000-2001 from appellant herein. 3.2 The officers have visited M/s. Kumar Co. who had supplied cotton waste to appellants and also received cotton waste from appellant. That they are yet to receive an amount of ₹ 25,33,353/- from appellants herein. That appellants had contended that they did not receive cotton waste to the tune of ₹ 7,22,224/- though they had supplied the quantity under eleven invoices. That these details were unearthed from the miscellaneous file seized by officers. Partner of M/s. Srivari Cotton Traders also deposed that they had supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the diary is cleared from appellant. Interestingly, M/s. SPRT has no direct knowledge that the goods are cleared from appellants and has only hearsay evidence of Thirumoorthy who says to M/s. SPRT that the goods brought are from appellants. Shri P. Kanakaraj of M/s. SPRT stated that there was nothing on the goods so as to identify that the goods received by them and noted in the diary as VST belongs to appellants. 6. Another document is the income expenditure statement maintained by yarn broker Shri ThiruThirumoorthy. These documents were not maintained as part of the records of the appellant's factory or that of the accounts of M/s. SPRT. It is not recovered from the residence of Shri Thirumoorthy but interestingly again from M/s. SPRT. It only contained certain details of income expenditure of the said broker. Basing upon such details in the income-expenditure file, the department has arrived at a conclusion that appellants have cleared cheese yarn clandestinely. These documents have not been correlated with any other documents. 7. One other contention raised by the department is that the appellant did not have any reeling facility. The appellant has furnished the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant, they have produced the invoice for the purchase of reeling machine to establish that they have been clearing hank yarn also. The allegation of the department that the appellant did not have a reeling machine and did not manufacture any hank yarn therefore cannot be accepted. Apart from this, they have produced the list of job workers from whom they brought the hank yarn manufactured and the copies of AR-3A for movement of goods to job workers were also furnished. These AR3A copies have been duly verified and countersigned by the departmental officers. These would establish that appellants have manufactured and cleared hank yarn also and not merely cheese yarn as alleged by department. The allegation of the department that appellant did not clear hank yarn at all is therefore shaken and factually wrong. The allegation of clandestine clearance of goods being a serious one, though not proved to mathematical precision has to be established at least to the extent of balance of probabilities. In the present case, the department has raised the demand on the basis of documents which are mainly third party documents and only on statements of various persons. Therefore, in our vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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