2017 (3) TMI 763 - AT - Central Excise

Commissioner dismisses Revenue's appeal, no evidence of clandestine cigarette production. Central Excise duty demand dropped.

C.C.E., Bhopal Versus Reliable Cigarettes and Tobacco Pvt. Ltd.

C.C.E., Bhopal Versus Reliable Cigarettes and Tobacco Pvt. Ltd. - TMI Issues Involved:1. Allegation of clandestine manufacture and removal of cigarettes.2. Validity of statements recorded under duress and their subsequent retraction.3. Admissibility and reliability of computer printouts as evidence.4. Evaluation of transportation documents and efficiency reports.5. Physical control of the factory and the role of departmental officers.6. Procurement of raw materials for alleged clandestine manufacture.7. Evidence of payments for raw materials and receipt of payments for clandestine sales.Detailed Analysis:1. Allegation of Clandestine Manufacture and Removal of Cigarettes:The primary allegation was that the respondent clandestinely manufactured and removed cigarettes without paying the requisite Central Excise duty. The quantification of the alleged clandestine clearances was based on computer printouts from a laptop seized from Shri Marvin Ali, General Manager of the respondent's factory. However, the statements initially admitting to clandestine clearances were later retracted, and during cross-examination, Shri Ali asserted that his statements were recorded under duress.2. Validity of Statements Recorded Under Duress and Their Subsequent Retraction:The Commissioner found that the statements of Shri Marvin Ali, which were initially used to support the allegations, were unreliable due to his retraction and claims of coercion. The retraction was made before a civil court, and the Commissioner held that no credence could be given to such retracted statements.3. Admissibility and Reliability of Computer Printouts as Evidence:The computer printouts were deemed inadmissible under Section 36B of the Central Excise Act since it was not established that the computer was used regularly in the ordinary course of activities to store such information. The Commissioner thus disregarded this piece of evidence.4. Evaluation of Transportation Documents and Efficiency Reports:The transportation documents (GRs) recovered from M/s Shalimar Cargo and Seva Roadways did not specify the description of goods transported. The Commissioner observed that on the basis of such evidence, a duty demand could not be raised. Additionally, the efficiency reports for July and August 2003, which allegedly showed higher production, were explained during cross-examination as involving machines capable of producing both filter and non-filter cigarettes interchangeably.5. Physical Control of the Factory and the Role of Departmental Officers:The factory was under physical control, with departmental officers supervising clearances. The Commissioner noted that there was no evidence of collusion between the officers and the respondent. The officers' statements supported the respondent's claim that no clandestine removal occurred.6. Procurement of Raw Materials for Alleged Clandestine Manufacture:The Commissioner highlighted that no evidence was presented regarding the procurement of raw materials necessary for the alleged clandestine manufacture of cigarettes. The investigation failed to establish how the respondent procured such materials without detection.7. Evidence of Payments for Raw Materials and Receipt of Payments for Clandestine Sales:There was no evidence of payments made for the purchase of raw materials or receipts from the sale of alleged clandestinely removed cigarettes. The Commissioner concluded that without such evidence, the charge of clandestine removal could not be substantiated.Conclusion:The Commissioner concluded that the investigation failed to produce tangible and concrete evidence to prove the clandestine manufacture and removal of cigarettes by the respondent. The demand for Central Excise duty amounting to Rs. 5,40,66,655 was dropped, and no penalties were imposed on the respondent or other co-noticees. The appeal filed by Revenue was dismissed, upholding the impugned order.