Tribunal overturns Commissioner's orders due to insufficient evidence and flawed proceedings.

Deepak Hinges Pvt. Ltd. Unit-ii, Monica Steel Pvt. Ltd. Versus CC & CE (Appeals), Noida And Others

Deepak Hinges Pvt. Ltd. Unit-ii, Monica Steel Pvt. Ltd. Versus CC & CE (Appeals), Noida And Others - 2019 (21) G. S. T. L. J119 (Tri. - Allahabad) Issues Involved:
1. Legality and authenticity of the Panchnama proceedings.
2. Reliance on statements recorded during the investigation.
3. Allegations of clandestine manufacture and removal.
4. Denial of SSI exemption under Notification No. 8/2003-CE.
5. Clubbing of clearances for determining total value.
6. Demand of duty based on annexures.

Detailed Analysis:

1. Legality and Authenticity of the Panchnama Proceedings:
The appellants challenged the Panchnama proceedings dated 03/04.07.13, arguing that the documents recovered were manipulated and fabricated. The Tribunal found that the Panchnama failed to describe the documents adequately, did not specify who found them, and lacked details on whether the documents were sealed to prevent manipulation. The Tribunal cited the case of Kuber Tobacco Products Ltd. v CCE, Delhi, emphasizing the need for detailed guidelines in Panchnama preparation to ensure credibility.

2. Reliance on Statements Recorded During the Investigation:
The Tribunal noted that the Commissioner relied on statements recorded during the investigation, which the appellants disputed. The appellants argued that they were not given the opportunity to cross-examine the individuals who made these statements, violating principles of natural justice. The Tribunal referred to the cases of Andaman Timber Industries v CCE, Kolkata and CCE v Kurele Pan Products Pvt. Ltd., concluding that the Commissioner erred in law by relying on these statements without cross-examination.

3. Allegations of Clandestine Manufacture and Removal:
The Tribunal highlighted that the charge of clandestine clearance is serious and requires positive evidence. The case against the appellants was based on private records and statements, which were disputed. The Tribunal found that the quantification of demand was based on assumptions and lacked corroborative evidence. Citing the case of Oudh Sugar Mills Ltd. v Union of India, the Tribunal concluded that the allegations of clandestine clearance could not be upheld.

4. Denial of SSI Exemption under Notification No. 8/2003-CE:
The appellants argued that the SSI exemption could not be denied based on the use of brand names, as the department failed to establish ownership of the brand names by another person. The Tribunal found that the department did not provide evidence that the brand names belonged to any "other person," thus the SSI benefit could not be denied. The Tribunal referred to various decisions supporting this view, including CCE, Ahmedabad-II Vs. Gujarat Healthcare and Ample Industries Vs CCE, Rajkot.

5. Clubbing of Clearances for Determining Total Value:
The Commissioner held that the clearances of all companies should be clubbed, as they were allegedly controlled by Shri B.M. Garg. However, the Tribunal found that the Commissioner confirmed the demand jointly and severally, thus accepting the separate identities of the companies. The Tribunal cited the cases of Punjab General Manufacturing Works Vs. CCE, Lucknow and Bentex Industries v CCE, New Delhi, concluding that clubbing of clearances was not warranted.

6. Demand of Duty Based on Annexures:
- Annexure 5: The demand was based on sales invoices of customers/dealers. The Tribunal found that the department did not establish that the dealers dealt exclusively with the appellants' goods, thus the demand could not be confirmed.
- Annexure 4: The demand was based on private records recovered during the Panchnama. The Tribunal found that no inquiries were conducted with the buyers listed in the statutory invoices, rendering the demand unsustainable.
- Annexure 3: Similar to Annexure 4, the demand was based on statutory invoices without inquiries with the buyers, making the demand unsustainable.
- Annexure 2: The demand was based on entries in private records, which the Tribunal found unreliable due to serious infirmities in the Panchnama.
- Annexure 1: The demand was proposed and confirmed despite no entries relating to the appellant, making it unsustainable.

Conclusion:
The Tribunal found that the evidence relied upon by the department was insufficient and flawed. The Panchnama proceedings were not conducted properly, and the statements used were not corroborated by cross-examination. The allegations of clandestine manufacture and removal, denial of SSI exemption, and clubbing of clearances were not supported by adequate evidence. Consequently, the Tribunal set aside the orders of the Commissioner and allowed the appeals with consequential relief to the appellants.