2013 (9) TMI 315 - AT - Central Excise

Tribunal overturns order due to lack of evidence & procedural violations

The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The decision was based on the lack of corroborative evidence, ... SSI Exemption - Appellant is a manufacturer of Submersible Copper Winding Wire/Insulated Copper Wire - Undertaking manufacturing activities without Central Excise registration – Show cause Notice was issued denying the benefits of SSI Exemption - Statement recorded of the proprietor Shri Parag Patel and one Shri Bhatt. The said statements were recorded on 29th April & 18/02/2003. Also seen from the records that Shri Parag Patel and Shri Rupesh Chudgar, Proprietor, had retracted the statements given by swearing on oath on affidavit and submitted the same to the DGCEI authorities and also to the Commissioner concerned – Rejecting the affidavit , DGCEI again recorded the statements of the said persons and the statements recorded were again retracted – Appellants were forced and pressurized on in making pencil entry in statutory Sales Tax register. In bail application by proprietor of the appellant, his father had clearly indicated that DGCEI officers had put pressure during inquiry, force and threat were applied for making pencil entries in the Sales Tax Register – Held that:- Department could not conclusively establish clandestine removal based on the private records as they were retracted and needs to be supported by other independent corroborative and tangible evidence - Adjudicating authority has entered into an arena of presumption and assumption - From private records, appellants have demonstrated that there was no clandestine removal of goods from the factory and all entries were recorded. Appellant had informed lower authorities names and address of purchasers of finished goods and investigating authorities have not recorded any statements, and even if recorded are not relied upon as is evidence from allegations in show cause notice – Relying upon the judgment of Hon'ble High Court of Gujarat in the case of Vishwa Traders P. Ltd. [2013 (4) TMI 55 - GUJARAT HIGH COURT] would be very relevant as the said judgment clearly holds as to the evidential value of the retracted statements and corroborative evidence which are required - There is also no endeavour of the lower authorities to corroborate allegations of clandestine removal of goods, in as much as, there is no evidence brought on record of the transporters having transported the goods without bills - Statements were recorded by lower authorities by putting pressure and under coercion and they were made to make pencil entries on Sales Tax register – Appeal allowed – Decided in favor of Assessee. Issues Involved:1. Allegation of clandestine manufacture and removal of goods without payment of Central Excise duty.2. Validity of evidence obtained under alleged coercion and duress.3. Reliance on retracted statements and private records.4. Confirmation of demand based on presumptions and assumptions.5. Compliance with principles of natural justice.Issue-wise Detailed Analysis:1. Allegation of clandestine manufacture and removal of goods without payment of Central Excise duty:The appellant was accused of manufacturing and clearing submersible copper winding wire/insulated copper wire without Central Excise registration, resulting in the evasion of duty. The Revenue conducted a search operation on 29/04/2003, seizing various documents purportedly indicating illicit production and clearance. The lower authorities concluded that the appellant had clandestinely manufactured and cleared goods during 2001-02 and 2002-03, evading duty.2. Validity of evidence obtained under alleged coercion and duress:The appellant contested the validity of the evidence, claiming that statements and admissions were obtained under coercion and duress by the DGCEI officers. The appellant and his employees retracted their statements, filing affidavits alleging pressure tactics. Despite these retractions, the Joint Director, DGCEI, maintained that the statements were given voluntarily. The appellant's father also submitted an affidavit during a bail application, reiterating the claims of coercion.3. Reliance on retracted statements and private records:The adjudicating authority relied heavily on the retracted statements and private records, such as pencil entries in Sales Tax registers, to confirm the demand. However, the adjudicating authority acknowledged that the allegation of clandestine removal based on these retracted statements and private records was not conclusively established and required independent corroborative and tangible evidence. The investigating officers admitted that there was no other evidence corroborating illegal sales, and the buyers contacted did not provide statements supporting the Revenue's case.4. Confirmation of demand based on presumptions and assumptions:The adjudicating authority calculated the demand by presuming the quantity of goods seized in April 2003 represented the entire month's production and extrapolated this to estimate annual production. This method was not disclosed to the appellant in the show cause notice, violating the principles of natural justice. The Tribunal found this approach unsustainable, as the demand was based on presumptions and assumptions without concrete evidence.5. Compliance with principles of natural justice:The Tribunal noted that the adjudicating authority's confirmation of demand was beyond the case made out in the show cause notice, violating principles of natural justice. The appellant was not given a fair opportunity to contest the basis of the demand, which was derived from assumptions rather than disclosed evidence.Conclusion:The Tribunal found that the impugned order was based on presumptions and assumptions, lacking corroborative evidence. The retracted statements and private records, obtained under alleged coercion, were not sufficient to establish clandestine removal conclusively. The demand was confirmed without proper disclosure to the appellant, violating principles of natural justice. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.