2014 (4) TMI 653 - AT - Central Excise

Tribunal overturns Commissioner's order due to lack of document supply, remands for fresh adjudication

The Tribunal set aside the Commissioner's order confirming demands and penalties on the company and its director for alleged procurement of illegally ... Duty demand - Estimation of unaccounted production of sponge iron - Receipt of unaccounted iron ore - The transportation of iron ore up to the Uslapur by Railways was under the documents called Railway Receipts (RRs) issued by the Railways - Held that:- The allegation of receipt of unaccounted iron ore is based on the difference between the iron ore accounted for by the appellant company in their records and the receipt of iron ore on the basis of the RRs in the name of the appellant company or endorsed by others to them. The appellant s plea is that in respect of a number of RRs which are in their name for the reason that the iron ore had been transported in the rates assigned to them, the iron has not been received by them but has been received by others against the endorsements on the RRs by them and these facts can be clarified only when the RRs are made available to them but the same have not been made available by the department in spite of their request. Since, the department's case is based on the documents received from the railways and also recovered from the transport company, all these documents have to be supplied and non-supply of these documents would result in denial of natural justice. Similarly, when in respect of the RRs endorsed to M/s Jai Ambey Mineral it is being alleged on the basis of statement of Shri Dilip Kumar Markam that the consignments of iron ore have been transported to the factory premises of the appellant and when the request for cross examination of Shri Dilip Kumar Markam had been made, his cross examination has to be allowed - Matter remanded back - Decided in favour of assessee. Issues:1. Allegations of procurement and use of illegally mined iron ore without proper accounting.2. Discrepancy in the quantity of iron ore received by the company.3. Non-payment of service tax by the company.4. Imposition of penalties on the company and its director.Analysis:1. The appellant company was accused of procuring illegally mined iron ore without proper accounting, leading to the manufacturing of sponge iron without payment of duty. The investigation revealed discrepancies in the quantity of iron ore received by the company compared to what was recorded. The company was also found to have received Goods Transport Agency service without paying the required service tax. The show cause notice demanded recovery of Central Excise duty, service tax, and imposed penalties on the company and its director.2. The Commissioner confirmed the demands and penalties imposed on the company and its director. The appellant challenged this order through appeals and stay applications. The main contention raised by the appellant was the lack of a proper basis for the duty demand, citing discrepancies in the calculation of unaccounted sponge iron production. The appellant argued that the department's reliance on railway receipts (RRs) without providing them for verification denied natural justice.3. The defense reiterated the findings of the Commissioner, emphasizing the determination of iron ore quantity based on RRs procured from railways. The defense argued that where consignments were received in other names but meant for the appellant company, endorsements were made accordingly. The defense maintained that there was no denial of natural justice and cited a relevant court judgment to support their position.4. Upon considering both sides' submissions and reviewing the records, the Tribunal found merit in the appellant's argument regarding the denial of natural justice. The Tribunal noted the importance of providing all relevant documents, including RRs and those recovered from the transport company, for a fair adjudication process. The lack of document supply hindered the appellant's ability to clarify discrepancies. The Tribunal set aside the impugned order, remanding the matter for fresh adjudication with the provision for cross-examination of involved individuals. The appeals and stay applications were disposed of accordingly.