2026 (1) TMI 641 - AT - Central Excise

Admissibility of seized private diary and partner's s.14 statements u/s 36A CE Act; appeal dismissed

Dominant issue: admissibility and evidential weight of a seized private diary and statements under s.14 CE Act, 1944, and whether those establish ... Demand duty with interest - clandestine manufacture and clearance of the excisable goods to various persons - seizure of private diary and statements recorded under Section 14 of Central Excise Act, 1944 - without making proper entry in the statutory records and without payment of excise duty - principles of Res-judicata - Evidential value of the confessional statement - presumption in respect of the correctness of the facts stated in the document recovered or tendered during the investigation proceedings - HELD THAT:- The appellant who had never disputed the recovery of “Red Diary titled Laxmi Book” from his premises and his connection with the said diary, all of sudden by the advent of new counsel started disowning the diary and denying his connection with the same. No merits in the said submissions as the affidavit claiming so has been filed for first time in 20.01.2017 in respect of the recovery made from the premises of the appellant on 11.01.2010 i.e. more than seven years after the search. The said affidavit was never filed at the time of investigation or in proceedings before the lower authority and not even at the time of filing this appeal or at the time of argument of stay application. It is settled principle that the question sought to be agitated by way of this affidavit is a question of fact and should have been agitated at the first available opportunity. Such belated of submission of this affidavit on 20.01.2017 is contrary to settled principles of law and the affidavit filed needs to be rejected on this ground. As per Section 36A of Central Excise Act, 1944, presumption is in respect of the correctness of the facts stated in the document recovered or tendered during the investigation proceedings. In this case not only the “Red Diary titled Laxmi Book” is admissible in evidence, in view of the presumption cast by the above section but also for the reason that recovery and correctness of the facts/ entries have been admitted by the Partner of the appellant in his statements recorded under Section 14 of Central Excise Act, 1944. I do not find anything contrary to the above presumption being stated in the appeal. The question of clandestine clearance is purely a question of fact and needs to be determined on the basis of the evidences recovered and marshalled in a particular proceedings. There cannot be any precedence without showing that the cases relied by the appellant were rendered in the similar or identical circumstances. It is settled principle that one addition fact/ evidence makes the case completely different from relied upon by the appellant. It is evident from the facts as stated, that the partner of the appellant firm has admitted to the recovery of the said “Red Diary titled Laxmi Book” and to the contents of the said diary. The admission of the contents is also evident from the fact that the appellant has deposited the part duty against the admitted clandestine clearances vide GAR-7 Challan No 19.01.2010 for Rs 25,000/- and GAR-7 Challan No 20 dated 09.02.2010 for Rs 25,000/-. The fact of clandestine clearance was as per the said “Red Diary titled Laxmi Book” was again admitted by the appellant in his statement recorded on 25.03.2011. It is settled principle in law that the facts admitted in the proceedings need not be proved by the other party. The arguments being advanced by the appellant in the present appeal were foreclosed in terms of the submissions made by the appellant before the Adjudicating authority. Acting on the submissions made by the appellant adjudicating authority has not imposed any penalty. Raising these arguments for the first time in subsequent proceedings will be hit by the principles of Res-judicata. Thus in view of the discussions as above I do not find any merits in this appeal. Appeal is dismissed. Issues: (i) Whether the demand of excise duty and interest for clandestine manufacture and removal is sustainable; (ii) Whether penalty under Rule 25(b) on the firm and penalty under Rule 26 on the partner are sustainable; (iii) Whether the seized red diary and the partner's confessional statements are admissible and constitute sufficient/corroborative evidence; (iv) Whether prior orders arising from the same search (confiscation set aside by Tribunal) operate to invalidate the present demands or proceedings.Issue (i): Whether the demand of excise duty and interest on clandestine manufacture and removal is sustainable.Analysis: The Tribunal examined the evidentiary material including the recovered diary, admissions by the partner recorded under Section 14, part deposits by the party by GAR-7 challans, and applicable provisions of Section 11A read with Sections 11AB and 11AA. The Tribunal applied principles relating to burden of proof in clandestine/white-collar contraventions and noted that material facts were within the special knowledge of the appellants; it also considered precedents on sufficiency of confessional statements together with corroborative material.Conclusion: The demand of excise duty and interest is upheld in favour of the Revenue.Issue (ii): Whether penalty under Rule 25(b) on the firm and penalty under Rule 26 on the partner are sustainable.Analysis: The Tribunal reviewed rule provisions and relevant authorities addressing imposition of penalties on firms and on partners. It considered that penalty under Rule 25(b) against the firm is warranted on the established clandestine manufacture and removal. Regarding personal penalty under Rule 26 on the partner, the Tribunal addressed earlier appellate action (which had set aside the personal penalty) and applied precedents concerning imposition of separate penalties on partners when a penalty has been imposed on the firm.Conclusion: Penalty on the firm under Rule 25(b) is sustained (in favour of Revenue). The Tribunal's overall decision results in maintenance of the adjudication on penalty as reflected in the impugned order sequence (outcome overall not favourable to the appellant firm).Issue (iii): Whether the seized red diary and the partner's confessional statements are admissible and sufficient/corroborative evidence.Analysis: The Tribunal applied Section 36A presumption as to documents seized and considered legal principles on confessional statements and retractions (including requirement of voluntariness and possibility of corroboration). It found the diary recovery admitted by the partner in statements recorded under Section 14, part duty deposits corroborative, and that the confessional statements were voluntary and supported by independent evidence (seized stocks, entries, and deposits), making the documentary and testimonial material admissible and probative.Conclusion: The red diary and the partner's confessional statements are admissible and constitute sufficient/corroborative evidence for upholding the demand and penalties (in favour of Revenue).Issue (iv): Whether prior Tribunal order setting aside confiscation (arising from the same search) nullifies or bars the present proceedings.Analysis: The Tribunal distinguished the earlier order that set aside confiscation on specific factual and evidentiary grounds, noting that that decision did not address or disallow the clearances and admissions recorded in the red diary or the confessional statements. The Tribunal further applied principles of res judicata and constructive res judicata, observing that the appellant had not raised the present factual/contention at the earliest opportunities and that the earlier decision did not cover the same matters in identical circumstances.Conclusion: The prior order does not operate to invalidate the present demands; the plea based on that earlier decision is rejected (in favour of Revenue).Final Conclusion: On the consolidated factual and legal analysis the Tribunal dismissed the appeal, upholding the departmental demand and evidentiary reliance on the seized diary and confessional statements; the adjudication as to duty, interest and penalties stands against the appellant, resulting in dismissal of the appeal.