CESTAT sets aside demand and penalties for alleged clandestine removal lacking evidence and proper investigation

CESTAT Ahmedabad allowed the appeal and set aside demand, interest and penalties imposed for alleged clandestine removal of galvanized MS wires. The tribunal found no evidence of clandestine clearance, noting that no investigation was conducted with transporters, no buyers were identified, no payment evidence existed, and the principal manufacturer was not interrogated. Cross-examination under Section 9D of Central Excise Act was not permitted. The case relied solely on panchnama and statements without tangible evidence proving clandestine removal beyond doubt.

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Issues involved:
The issues involved in the judgment are related to alleged clandestine removal of goods, liability of central excise duty on job worker, cross-examination of witnesses, and lack of evidence for clandestine clearance.

Alleged Clandestine Removal of Goods:
The case involved the appellant company engaged in manufacturing and clearance of armoured wires/strips, undertaking job work activities for galvanizing MS wires received from principal manufacturers. The central excise department alleged diversion of quantities of galvanized MS wires as clandestinely cleared from the factory. Statements of company officials were recorded, leading to a show cause notice and subsequent appeals.

Liability of Central Excise Duty on Job Worker:
The appellant argued that as a job worker, the liability for central excise duty on galvanized wires should rest with the principal manufacturers who sent the wires for galvanizing. Additionally, it was contended that galvanizing MS wires does not amount to manufacture. The appellant maintained records of receipt and return of wires, disputing any clandestine clearance.

Cross-Examination of Witnesses:
The Adjudicating Authority was criticized for not allowing cross-examination of witnesses, which is mandated under Section 9D of the Central Excise Act, 1944. The judgment highlighted the importance of cross-examination to establish the reliability of witness statements in cases of alleged offenses under the Act.

Lack of Evidence for Clandestine Clearance:
The Tribunal found that the department's case relied heavily on statements and panchnama, without substantial evidence of clandestine clearance. No investigation was conducted with transporters or buyers of allegedly cleared goods. The lack of tangible evidence to prove clandestine removal beyond doubt led to the setting aside of the demand, interest, and penalties imposed. The judgment emphasized the need for concrete evidence to establish allegations of clandestine activities.

Conclusion:
In conclusion, the impugned order was set aside, and the appeals were allowed based on the lack of substantial evidence supporting the allegations of clandestine removal. The judgment highlighted the importance of due process, including cross-examination of witnesses, and the necessity of tangible evidence to establish liability and penalties in central excise duty cases.

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