2011 (4) TMI 971 - AT - Central Excise

Tribunal overturns revenue's appeal, emphasizes procedural compliance

The Tribunal allowed the appeals filed by the assessee-company and individual, rejecting the revenue's appeal. The impugned order was set aside due to ... Demand of duty, penalty and confiscation of goods – redemption fine – time barred - sole ground of the demand for the extended period is suppression of production and clandestine removal of cigarettes - He would submit that during the relevant period, the factory of the appellant was under 24 hours of physical control by 8 Central Excise Officers and two Central Excise Sepoys, posted as well as living and also eating in the factory and always present in the Central Excise office or in the guesthouse, both situated within the factory itself, round the clock; it is impossible for the assessee-appellant to suppress any activity of clandestine manufacture of cigarettes and cut tobacco – Held that:- officers posted to the factory premises of the assessee-appellant had in fact followed the procedures scrupulously and have admitted the same in the cross examination before Adjudicating Authority and not an issue in dispute, order is not sustainable, order is incorrect and unsustainable and is liable to be set aside, order set asode and allow the appeals filed by the assessee-company and individual and reject the appeal filed by the revenue Issues Involved:1. Alleged Clandestine Removal of Cigarettes2. Invocation of Extended Period of Limitation3. Jurisdiction of the Adjudicating Authority4. Denial of Cross-Examination5. Reliability of Statements and Evidence6. Penalties and ConfiscationIssue-wise Detailed Analysis:1. Alleged Clandestine Removal of Cigarettes:The central issue is the confirmation of duty demand by the Adjudicating Authority regarding the alleged clandestine removal of cigarettes from the factory premises. The assessee-appellant was accused of evading duty through clandestine removal based on documents recovered during a raid. The defense argued that during the relevant period, the factory was under 24-hour physical control by Central Excise Officers, making it impossible to suppress any activity related to the manufacture or removal of cigarettes.2. Invocation of Extended Period of Limitation:The demand covered September 1994 to October 1995, but the show cause notice was issued on 12-12-1996, invoking the extended period of limitation due to alleged suppression of facts. The assessee contended that the extended period could not be invoked as the factory was under constant supervision by Central Excise Officers, and there was no collusion alleged against these officers. The Tribunal supported this view, citing various precedents that the presence of physical control negates the possibility of suppression without collusion.3. Jurisdiction of the Adjudicating Authority:The assessee challenged the jurisdiction of the Commissioner who issued the show cause notice while holding additional charge of Guntur Commissionerate without a gazette notification. The Tribunal noted that the jurisdiction issue was not raised before the Tribunal previously and thus upheld the Commissioner's authority, stating that a Commissioner of Central Excise is inherently a Central Excise officer upon entering the Indian Revenue Service.4. Denial of Cross-Examination:The assessee argued that the Commissioner did not allow cross-examination of certain departmental witnesses, which was crucial for contesting the statements used against them. The Tribunal found merit in this argument, emphasizing that statements used against an assessee must be subject to cross-examination to be valid.5. Reliability of Statements and Evidence:The Tribunal scrutinized the evidence, including statements from various individuals and documents recovered during the raid. The defense argued that the statements were coerced and retracted, and the documents did not conclusively prove clandestine removal. The Tribunal found that the evidence presented by the revenue was not corroborated sufficiently to establish clandestine removal beyond doubt.6. Penalties and Confiscation:The Adjudicating Authority had imposed penalties on the company and individuals and ordered confiscation of land, building, plant, and machinery. The Tribunal, however, found that the demand for extended period was flawed due to the lack of collusion allegations and improper issuance of show cause notices to the officers. Consequently, the penalties and confiscation orders were deemed unsustainable.Conclusion:The Tribunal set aside the impugned order on the ground of limitation, citing the absence of collusion allegations and the flawed show cause notice. The appeals filed by the assessee-company and individual were allowed, and the revenue's appeal was rejected. The judgment emphasized the importance of adhering to procedural requirements and the necessity of corroborative evidence in cases of alleged clandestine removal.