2024 (1) TMI 1156 - AT - Central Excise

Director's penalty under Rule 26 overturned due to lack of evidence for clandestine supply and natural justice violations

CESTAT Ahmedabad allowed the appeal against penalty imposed under Rule 26 of Central Excise Rules, 2002. The appellant Director was charged with supplying ... Levy of penalty u/r 26 of Central Excise Rules, 2002 - appellant being Director of M/s. Senor Metal Pvt Ltd Supplied the raw material clandestinely to M/s. Silver Techno cast who inturn manufactured and cleared their final products clandestinely - witnesses were not cross-examined - violation of principles of natural justice - HELD THAT:- From the statement of partner of M/s. Silver Techno Cast it is clear that though the appellant companies M/s. Senor Metal Pvt Ltd has been stated as supplier of the goods but as regards the supplies made without payment of duty the name of M/s. Senor Metal Pvt Ltd is not appearing which shows that all the supply is made by appellant’s company is under invoice and no clandestine removal was made. It is found that though the employee of the appellant company admitted to supply the goods but no quantity, value or payment thereof was brought on record as evidence. Therefore, mere verbal admission will not help the revenue. The appellant’s company M/s. Senor Metal Pvt Ltd is an excisable unit liable to pay excise duty it is worth to note that despite making charge that the appellant company has supplied the goods without issuing invoice which means without payment of duty no action was taken by the department for payment of duty from M/s. Senor Metal Pvt Ltd This also strengthen the case of the appellant that no clandestine goods removal of the M/s. Senor Metal Pvt Ltd was established. It is further found that when the appellant has seriously objected the charge of supply of goods by M/s. Senor Metals without issuing invoice to M/s. Silver Techno cast the adjudicating authority was duty bound to cross examine the employee of the M/s. Senor Metal Pvt Ltd to admit his statement as evidence which is required under Section 9 (d) of Central Excise Act, 1944 without cross examine the witness his statement cannot be relied - the department could not establish case of removal of goods by M/s. Senor Metal Pvt Ltd Without issuing invoices to M/s. Silver techno cast. Accordingly, there is no case of abetment of evasion of duty by the present appellant. Hence, the penalty is not sustainable. Appeal allowed. Issues involved: Appeal against penalty imposed under Rule 26 of Central Excise Rules, 2002 for alleged abetment of evasion of Excise Duty.Summary:Issue 1: Settlement under Sab Ka Vishwas Legacy Dispute Resolution Scheme, 2019 (SVLDRS)The appellant argued that since the main party involved had settled their case under SVLDRS, the penalty should be waived for all co-noticees, including the present appellant. It was contended that the procedural lapse of not applying for SVLDRS should not deprive the appellant of the waiver entitled to them.Issue 2: Lack of evidence for clandestine supplyThe appellant disputed the allegation of supplying raw materials clandestinely without issuing invoices. The appellant's representative cited various judgments to support their argument. The Tribunal noted that the statement of a partner of M/s. Silver Techno Cast did not specifically implicate the appellant's company in any clandestine activities. The lack of concrete evidence such as quantity, value, or payment for the alleged supplies weakened the case against the appellant.Issue 3: Failure to cross-examine witnessesThe Tribunal highlighted the failure of the adjudicating authority to cross-examine the employee of the appellant's company, as required under Section 9 (d) of the Central Excise Act, 1944. Without proper cross-examination, the verbal admission of the employee could not be relied upon as conclusive evidence. The Tribunal concluded that the department failed to establish the case of goods removal without invoices, leading to the penalty being deemed unsustainable.In conclusion, the Tribunal set aside the penalty imposed on the appellant, ruling in favor of the appellant and allowing the appeal.