2024 (1) TMI 448 - AT - Central Excise

Tribunal allows appeal in Rs. 50 crore steel ingots case citing natural justice violation and time-barred notice

CESTAT Kolkata allowed the appeal concerning alleged clandestine removal of steel ingots worth over Rs. 50 crores. The tribunal found that crucial ... Clandestine manufacture and clearance - requirement of direct and corroborative evidence for clandestine removals - evidentiary value of retracted statements - burden of proof on Revenue to establish clandestine clearance - principles of natural justice - supply of relied upon documents for de novo adjudication - limitation / time-bar for issuance of show cause noticeClandestine manufacture and clearance - requirement of direct and corroborative evidence for clandestine removals - evidentiary value of retracted statements - burden of proof on Revenue to establish clandestine clearance - Whether the confirmed demand for alleged clandestine manufacture and clearance could be sustained on the materials on record. - HELD THAT: - The Tribunal held that the allegation of clandestine manufacture and clearance is a serious charge which the Revenue must prove by tangible, direct and corroborative evidence (receipt/consumption of raw materials, unaccounted manufacture, corroboration from transporters/consignees, electricity or labour evidence, records showing movement or sale). In this case the Show Cause Notice and adjudication rested principally on recorded statements of company officials and arithmetical stock calculations arrived at without actual weighment. The statement of A. K. Ladia had been retracted by him, diminishing its evidentiary value. No independent corroboration (third party statements, transporter documents, evidence of cash purchases/sales, electricity consumption, private records) was produced to support the charge. The Tribunal applied earlier precedents and concluded that the demand could not be sustained where quantification is based on assumptions and the only oral/documentary material is uncorroborated or retracted. [Paras 10, 11, 17]Demand based on alleged clandestine manufacture and clearance set aside on merits for lack of corroborative evidence and in view of retraction of the key statement.Limitation / time-bar for issuance of show cause notice - knowledge of Department from date of visit - Whether the Show Cause Notice dated 27/07/2004 was barred by limitation. - HELD THAT: - The Tribunal noted that the officials visited and recorded statements by September 2002 and that the Show Cause Notice was issued only on 27/07/2004. Relying on consistent decisions that show cause notices should normally be issued within six to twelve months from the date of the departmental visit (taken as the date when knowledge of the facts was available to the Department), the Tribunal concluded that the delay in issuing the SCN rendered it time barred. The Tribunal therefore allowed the appeal on limitation grounds in addition to the merits. [Paras 18, 19]Show Cause Notice held to be barred by limitation; appeal allowed on time bar ground as well.Principles of natural justice - supply of relied upon documents for de novo adjudication - Whether the adjudicating authority complied with the Tribunal's earlier direction to furnish relied upon documents before de novo adjudication. - HELD THAT: - The Tribunal found that its earlier order had directed the Department to provide all documents relied upon in the SCN for de novo adjudication. The appellants filed a letter (13/02/2008) stating the required documents had not been supplied, but the Adjudicating Authority's Order does not address those specific objections and proceeded to complete adjudication on 05/05/2008. The Tribunal observed that many crucial documents listed in the SCN were neither provided to the appellant nor available before the Bench, and that the de novo proceedings were completed ignoring the appellant's averments about non receipt. Non compliance with the Tribunal's direction and failure to supply relied documents offended principles of natural justice and undermined the adjudicatory process. [Paras 2, 3, 10]Denovo proceedings found to have proceeded despite non compliance with the Tribunal's direction to furnish documents; deficiency reinforced the decision to set aside the demand.Final Conclusion: The appeal is allowed both on merits and on limitation: the confirmed demand is set aside for lack of corroborative evidence and because the SCN was time barred; the appellant is entitled to consequential relief as per law. Issues Involved:1. Non-provision of relied upon documents.2. Validity of the statement of clandestine removal.3. Method of stock taking and corroborative evidence.4. Delay in issuing the Show Cause Notice.Summary:Non-provision of Relied Upon Documents:The Tribunal noted that the Adjudicating Authority did not provide all the documents to the Appellant despite the Tribunal's earlier directive. The Appellant had filed a letter on 13/02/2008 stating that the required documents were not made available, which was ignored by the Adjudicating Authority. This non-compliance with the Tribunal's directions rendered the Denovo Proceedings flawed.Validity of the Statement of Clandestine Removal:The Appellant argued that the statement of Mr. A. K. Ladia, recorded on 01/09/2001, was retracted on 05/09/2001, claiming it was made under duress. The Tribunal agreed that in view of the retraction, the statement held no evidentiary value.Method of Stock Taking and Corroborative Evidence:The stock taking was done visually without actual weighment, making the shortage findings unreliable. The Tribunal emphasized the lack of corroborative evidence such as records of raw material purchases, sales, electricity consumption, or movement of vehicles. The Department's reliance on assumptions without concrete evidence was insufficient to prove clandestine removal.Delay in Issuing the Show Cause Notice:The Tribunal found the Show Cause Notice issued on 27/07/2004, more than two years after the initial search and statement recordings, to be unjustifiably delayed. The Department had all relevant documents by April 2002, and the delay rendered the demand barred by limitation.Conclusion:The Tribunal set aside the demand on both merits and limitation, highlighting the Department's failure to provide necessary documents, reliance on retracted statements, lack of corroborative evidence, and unjustifiable delay in issuing the Show Cause Notice. The appeal was allowed with consequential relief to the Appellant.