2019 (4) TMI 1680 - AT - Central Excise

Tribunal overturns duty demand and penalties, citing lack of evidence and procedural irregularities.

Meenu Paper Mills Pvt Ltd, Manish Kapoor Director Of, Shri Suresh Kumar Garg, Shri Rakesh Kumar Agarwal (proprietor) Versus C.C.E. & S.T. -Meerut-I (In All Appeals)

Meenu Paper Mills Pvt Ltd, Manish Kapoor Director Of, Shri Suresh Kumar Garg, Shri Rakesh Kumar Agarwal (proprietor) Versus C.C.E. & S.T. -Meerut-I (In ... Issues Involved:1. Allegations of clandestine removal and confirmation of duty demand.2. Search and seizure procedures.3. Admissibility and reliability of electronic evidence.4. Cross-examination of witnesses.5. Evidence of production capacity and raw material procurement.6. Shortages of finished goods.Detailed Analysis:1. Allegations of Clandestine Removal and Confirmation of Duty Demand:The Commissioner confirmed a duty demand of Rs. 8.96 Crores against M/s. Meenu Paper Mills Pvt. Ltd. based on allegations of clandestine removal, supported by data retrieved from electronic devices and statements of various individuals. Penalties were also imposed on the company and other appellants, including directors and suppliers.2. Search and Seizure Procedures:The appellants argued that the searches and seizures were not conducted in accordance with the Central Excise Act and the Code of Criminal Procedure (CrPC). They highlighted that witnesses to the searches were not local inhabitants as required by Section 100 of CrPC. The same witnesses were repeatedly used in different searches, which raised doubts about the fairness and legality of the searches. The Tribunal agreed that the repeated use of the same witnesses violated the legal requirements and cast serious doubts on the searches' integrity.3. Admissibility and Reliability of Electronic Evidence:The appellants contended that the electronic devices, particularly two Pendrives, were not sealed at the time of seizure, making the data retrieved from them unreliable. The Tribunal noted discrepancies in the data retrieved on different dates from the same Pendrive, suggesting possible tampering. The Tribunal emphasized that the conditions under Section 36B of the Central Excise Act for the admissibility of computer printouts were not met, rendering the electronic evidence inadmissible.4. Cross-Examination of Witnesses:The appellants' request for cross-examination of witnesses whose statements were relied upon by the Revenue was denied by the adjudicating authority. The Tribunal held that cross-examination was essential to test the veracity of the statements, especially when some were retracted. The denial of cross-examination violated the principles of natural justice and Section 9D of the Central Excise Act, making the statements inadmissible.5. Evidence of Production Capacity and Raw Material Procurement:The appellants argued that their production capacity was insufficient to manufacture the alleged quantity of clandestinely removed goods. The Tribunal noted that the appellants' production capacity was 15,000 MT per annum, while the alleged clandestine production was almost double. The Tribunal found no evidence of procurement of raw materials necessary for such large-scale production, further weakening the Revenue's case.6. Shortages of Finished Goods:The Revenue detected shortages of finished goods during a visit to the appellants' factory. However, the Tribunal found no evidence linking the shortages to clandestine removal. The mere acceptance of shortages by an accountant did not prove clandestine removal, as held by the Allahabad High Court in a similar case.Conclusion:The Tribunal set aside the impugned order, concluding that the allegations of clandestine removal were not supported by sufficient and reliable evidence. The demand of Rs. 8.96 Crores and the penalties imposed on M/s. Meenu Paper Mills Pvt. Ltd. and other appellants were annulled. All appeals were allowed, and the Tribunal emphasized the need for tangible and corroborative evidence to uphold such serious allegations.