TaxTMI 
TaxTMI 
2019 (1) TMI 706
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....t not withstanding the fact that the assessee (2nd respondent) had not followed the procedure laid down for procurement of yarn duty free in terms of the said Notification and also in the light of the fact that eventually such exporters are barred from availing 'duty drawback' on their exports in terms of Rule 3 of Customs and Central excise Duties Drawback Rules 1995, which was not appreciated by the Tribunal? b) Whether Tribunal was correct in holding that there was no motive behind the fraud alleged that they cleared cheese yarn in the guise of hank yarn as hank yarn attracts nil rate of excise duty and lesser rate of sales tax (2%) as against yarn in any other form, which attracts excise duty of 9.2% (8% BED plus 15% on BED as AED) and 4% sales tax. c) Whether Tribunal was correct in holding that the department has failed to prove the charge against the defendant (2nd respondent, the assessee) that they had cleared cheese yarn in the guise of hank yarn when majority of the buyers have admitted in their statements recorded under Section 14 of the CEA, 1944, that they were manufacturing terry towels out of the impugned goods in the power looms, which in any case canno....
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.... yarn with an intent to evade the payment of excise duty and clandestinely cleared the same. Further, the assessee intentionally destroyed the evidences of manufacture of sales of cheese yarn, once the yarn reached the destination and raised the invoices for the said supply of hank yarn, as there were exempted from the Excise duty at the relevant time. Accordingly, a show cause notice was issued calling upon the assessee to explain as to why (i) Central Excise duty amounting Rs. 71,08,503/- (BED) and Rs. 10,66,276/-(AED) totalling Rs. 81,74,779/- (Eighty One Lakhs Seventy Four Thousand and Seven Hundred and Seventy Nine Only) involved on the cotton yarn cleared, for the period from 01.02.1999 to 28.02.2002, in violation of Central Excise Rules should not be demanded from them under sub-section (1) of Section 11A of the Central Excise Act, 1944; (ii) Penalty equivalent to the amount of duty mentioned above should not be imposed on them under Section 11AC of the Central Excise Act, 1944; (iii) Penalty should not be imposed on them under Rules 9(2), 52A and 173Q of the Central Excise Rules, 1944 (erstwhile) and Rule 25 of Central Excise (No:2) Rules, 2001 (erstwhile); (iv) the....
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....and do not find any motive behind the fraud alleged against the assessee. Further, the Tribunal held that the assessee had no facility to manufacture cone yarn, as they have open ended machines by which cheese yarn alone could be manufactured. After taking note of the details given in the adjudicating order, the Tribunal opined that the evidence is too weak and insufficient to sustain the charge that clearances made by the assessee to several customers during the material period and this is so in the absence of the documentary evidence to substantiate such an allegation. Further, the Tribunal observed that retractions by the buyers of hank yarn from the assessee during the hearing will be prejudicial to the case of the revenue and once, the Tribunal accepts the claim of the assessee that they have not cleared cheese yarn in the guise of hank yarn, duty liability on the clearances cannot be made. Further, on the registers maintained by the assessee, the Tribunal observed that the records relied on by the Adjudicating Authority had not been maintained in the normal course of business and was unreliable. Thus, the Tribunal concluded by saying that the Commissioner had glossed over sev....
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....l was not justified in doing. Further, it is submitted that even for exemption to be availed, procedure set out under the relevant notification for availment of exemption has to be followed, which was not followed in the case of assessee. Further, the buyers from the assessee have confirmed that they received only cone yarn and not hank yarn. The discrepancies pointed out by the Tribunal are minor in nature and the same could not have been a reason to exonerate the assessee. Relying upon Section 9D(1)(a) of the Act, the statement made and signed before the Central Excise/Customs Officers is admissible in evidence and if a statement had been recorded under Section 14 of the Act, it shall be allowed in evidence. Further, it is submitted that non-availability of certain witnesses for cross examination is not fatal to the proceedings. Further, it is submitted that the Tribunal ignored the universal truth that only cheese yarn can be manufactured out of open ended machines and that power looms cannot use the hank yarn in the manufacture of terry towel. Further, the voluminous records which were recovered was completely brushed aside by the Tribunal. Relying upon the decision in the case....
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.... 10. Firstly, we take up the issue as regards the jurisdiction of this Court to examine the correctness of the order passed by the Tribunal in exercise of the powers conferred under Section 35G of the Act. 11. There is no requirement to refer to any decisions on the point, as if the assessee claims a benefit of a notification and the matter relates to a rate of duty, this Court will be barred from deciding the same, while exercising appellate powers under Section 35G of the Act. What is required to be seen in the instant case is whether the case pertains to a rate of duty touching upon the fact as to whether the assessee is entitled to claim the benefit of the exemption notification or the assessee's buyers would be entitled to avail the exemption under the relevant notifications. The facts of the case clearly show that proper records were not maintained by the assessee. This has been recorded by the Tribunal in paragraph 25 of the impugned order. However, the Tribunal went perverse in its approach by holding that the records having not been maintained properly, cannot be relied on and has to be treated as unreliable. This findings of the Tribunal is thoroughly perverse, sin....
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....ibunal was extremely superficial, without addressing the epicentre of the issue. The bulk of the documents, which were recovered, voluntary statements given by the Managing Director and the Director of the assessee was brushed aside. The statements recorded from the buyers and the documents recovered which wholly corroborate the statements cannot be brushed aside, as done by the Tribunal. Every case, where opportunity of cross examination was not allowed, will not vitiate the entire proceedings. The Adjudicating Authority was not conducting a trial of a criminal case, but was adjudicating a show cause notice as to whether there has been clandestine removal of excisable goods without payment of excise duty. In such cases, preponderance of probabilities would be sufficient. On examining the extensive factual details set out in the adjudicating order dated 20.06.2005, we have no hesitation to hold that the initial burden of proof has been discharged by the department and thus, the burden of proof shifts to the assessee to establish by independent evidence that there was no clandestine removal and the assessee cannot escape from the rigour of law by picking loopholes in the evidence pl....