Cenvat credit and clandestine removal disputes: untested statements, limitation, and unavailable goods defeated duty, confiscation, and fine.

Cenvat credit on aluminium ingots was held unsustainable where the clandestine removal allegation rested on transporter statements that were not subjected to cross-examination, contrary to Section 9D requirements, and the surrounding material showed a complete duty-paid manufacturing chain. The demand was also held time-barred because the department knew of the transactions in 2008 but issued notice only in 2013, with no basis for extending limitation. Confiscation and redemption fine were likewise held unsustainable because the underlying demand failed and the goods were not available for confiscation, resulting in consequential relief to the assessee.

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Issues: (i) Whether denial of Cenvat credit on aluminium ingots on the allegation of clandestine removal was sustainable. (ii) Whether the demand was barred by limitation. (iii) Whether confiscation and redemption fine could be sustained when the goods were not available.

Issue (i): Whether denial of Cenvat credit on aluminium ingots on the allegation of clandestine removal was sustainable.

Analysis: The demand rested principally on transporter statements and the same investigative material that had already been considered in the related settlement proceedings. The statements of transporters were not tested by cross-examination, and the requirement of examination in chief followed by cross-examination under Section 9D of the Central Excise Act, 1944 was not complied with. The findings recorded in the settlement proceedings established the movement of ingots, wire rods, stranded wires and conductors as part of a complete chain, with duty having been paid on the final products. In these circumstances, the allegation of clandestine removal was not supported by reliable evidence.

Conclusion: The denial of Cenvat credit was not sustainable and the finding was in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The relevant period was February 2008 to March 2008, while the show cause notice to the appellant was issued only in March 2013 after the department had already conducted investigation and possessed the material much earlier. The record showed that the department was aware of the transaction in 2008 itself, and no basis was shown for extending the limitation period. The delayed notice was therefore beyond time.

Conclusion: The demand was time-barred and the finding was in favour of the assessee.

Issue (iii): Whether confiscation and redemption fine could be sustained when the goods were not available.

Analysis: Once the underlying demand on alleged clandestine clearance failed, confiscation could not survive. Independently, the goods were not available for confiscation, and redemption fine cannot be imposed in respect of goods not available for such action.

Conclusion: Confiscation and redemption fine were not sustainable and the finding was in favour of the assessee.

Final Conclusion: The order confirming duty, penalty and redemption fine could not be sustained, and the appeals succeeded with consequential relief.

Ratio Decidendi: Reliance on untested witness statements is impermissible where the statutory requirement of cross-examination is not met, and confiscation with redemption fine cannot be sustained when the alleged demand itself fails and the goods are unavailable.

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