Tribunal grants relief to Vandevi Texturizers Pvt Ltd and CEO, deems penalties unsustainable

The Tribunal set aside the impugned order and allowed the appeals, granting consequential reliefs to the appellants, M/s Vandevi Texturizers Pvt Ltd and its CEO. The demand against the appellant unit and the penalties imposed were deemed unsustainable due to the lack of corroborative evidence, contradictory statements, and the denial of cross-examination of witnesses.

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Issues Involved:
1. Allegations of clandestine removal of duty-free procured raw materials.
2. Contradictory statements and lack of corroborative evidence.
3. Denial of cross-examination of witnesses.
4. Compliance with statutory requirements and procedural rules.

Issue-wise Detailed Analysis:

1. Allegations of Clandestine Removal of Duty-Free Procured Raw Materials:
The appellants, M/s Vandevi Texturizers Pvt Ltd and its CEO, were accused of diverting 2.31 lakh kg of Polyester Yarn into the open market instead of using it for manufacturing Polyester Knitted Fabrics. The investigation revealed that M/s Sunshine Overseas, the recipient EOU, did not receive the claimed shipments of Polyester Fabrics but instead received cheap quality raw materials from the market. Statements from various individuals, including partners of M/s Sunshine Overseas and the CEO of M/s Vandevi Texturizers, suggested that the Polyester Yarn was sold in the open market.

2. Contradictory Statements and Lack of Corroborative Evidence:
The Tribunal noted that the statements of key individuals, including the CEO of M/s Vandevi Texturizers, were contradictory. Initially, the CEO mentioned the removal of manufactured Polyester Grey Fabrics, but later he claimed the removal of Polyester Yarn. Additionally, statements from transporters were inconsistent, with some not mentioning the transportation of raw materials at all. The Tribunal emphasized that no incriminating documents or evidence were found during the investigation at the appellant's factory, which maintained proper statutory records.

3. Denial of Cross-Examination of Witnesses:
The Tribunal highlighted that the appellants were not allowed to cross-examine the individuals whose statements were used as the primary evidence against them. This denial was deemed a violation of Section 9D of the Central Excise Act, which mandates cross-examination when statements are the sole basis for allegations. The Tribunal stressed that without cross-examination, the statements could not be relied upon to substantiate the allegations.

4. Compliance with Statutory Requirements and Procedural Rules:
The appellants argued that they complied with all statutory requirements, including maintaining registers, filing periodical returns, and following the procedures for removal of finished goods to other 100% EOUs. The Tribunal found that the appellants had indeed followed the prescribed procedures and maintained proper records. The Tribunal also noted that the goods were certified to be warehoused by the jurisdictional Excise authority of M/s Sunshine Overseas, and there was no evidence of unaccounted cash transactions or transportation of raw materials to any identified buyers.

Conclusion:
The Tribunal concluded that the demand against the appellant unit and the penalties imposed were not sustainable due to the lack of corroborative evidence, contradictory statements, and the denial of cross-examination. The Tribunal set aside the impugned order and allowed the appeals, granting consequential reliefs to the appellants.

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