Commr. of C. Ex., Cus. and Ser. Tax, Daman vs Nissan Thermoware P. Ltd.

Harsha Devani, J.—In this appeal u/s 35G of the Central Excise Act, 1944 (the Act), the Commissioner, Central Excise, Customs and Service Tax, Daman has challenged order dated 25th March, 2009 2009 (246) E.L.T. 191 made by the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal) proposing the following two questions:

Whether the learned Tribunal is right in law in holding that the clandestine manufacture and removal of final product by the Assessee company was not proved in view of absence of independent evidence and was right in allowing appeal extending the benefit of doubt to the Appellant when the raw material noticed was short of the statutory record which was noticed in presence of independent panch witness?

Whether the learned Tribunal is right in allowing the appeal though the raw material which was being noticed as short and the resultant excisable manufacture goods were removed without account, without producing C. Ex. Invoices and without payment of C. Ex. Duty, as admitted by the director of Assessee Unit?

The Respondent Assessee is engaged in the manufacture of water bottles, water jugs, casseroles and tiffins etc. of insulated ware falling under Chapter 39 of the Central Excise Tariff Act, 1985. The Central Excise officers during physical verification of the stock of raw materials while conducting preventive checks at the factory premises of the Assessee, found shortage of 9975 kgs. HD as compared to the stock shown in RG-23A, Part-I Register. The Director of the Company admitted the use of the same in the manufacture of water jugs which had been cleared clandestinely without payment of duty. The Assessee also debited duty payment of Rs. 1,23,464/- in its MODVAT account. Pursuant to the aforesaid, a show cause notice came to be issued to the Assessee, which culminated into an order made by the adjudicating authority confirming the duty and the penalty on the Assessee and personal penalty of the Director. The Assessee as well as the Director carried the matter by filing separate appeals before the Commissioner (Appeals) who vide order dated 15th February, 2008 dismissed the appeals. Both the Assessee as well as the Director preferred separate second appeals before the Tribunal, which came to be allowed vide a common order.

Ms. Nayna Gadhvi, learned Standing Counsel for the Appellant as-sailed the impugned order of the Tribunal submitting that the Director of the Respondent during the course of preventive checks had admitted before the panchas that the raw material to the extent of the shortage noticed was used in the manufacture of various exportable goods and sold out in the open market in April to June, 1996 and had admitted the offence of illicit clearance committed by the Assessee. It was submitted that in the light of the aforesaid admission made on behalf of the Assessee which statement had not been retracted, the Department was not required to prove clandestine removal inasmuch as the facts stood admitted by the Assessee itself. In support of her submission, the learned Counsel placed reliance upon the decisions of the Apex Court in the case of Commissioner of C. Ex., Madras Vs. Systems and Components Pvt. Ltd., as well as in the case of K.I. Pavunny Vs. Assistant Collector (HQ), Central Excise Collectorate, Cochin, Attention was also invited to the order made by the Commissioner (Appeals) to point out that the raw material of which there was shortage was a raw material which was required in large quantities whereas the other inputs were required in small quantity hence, it was not possible for the Assessee to manipulate the shortage of HD as the same was required in bulk. It was submitted that in light of the facts and circumstances of the present case, the Tribunal was not justified in giving the Assessee the benefit of doubt as regards clandestine removal. It was, accordingly, submitted that the appeal requires consideration and the questions, as proposed or as may be deemed fit, be formulated by the Court.

As can be seen from the impugned order of the Tribunal, the Tribunal has noted that before the Commissioner (Appeals) on behalf of the Assessee it had, inter alia, been submitted that the physical stock of all the finished products and inputs duly tallied with the record except shortage of one input, that is, HD by 9975 kgs; there was no evidence supporting the allegations of illicit clearance and the demand was confirmed merely on the ground that the Director had voluntarily given the statement; the statement was not retracted to avoid further litigation; that for manufacture of insulated wares of plastic, other inputs like Polyol and Isocynate were absolutely essential and the same were tallying; the MODVAT Credit available on inputs was higher than the Central Excise liability on finished product, as duty on water jugs at the rate of and works out to be Rs. 1,23,464/- and at the rate of 25% MODVAT Credit works out to be Rs. 1,29,757.95 ps., hence, the manufacturer would have been benefited if it had availed of MODVAT Credit and cleared the goods after proper accounting. It was also submitted that there was no evidence available to substantiate the clandestine clearance.

Before the Tribunal, the Assessee placed reliance on various decisions of the Tribunal for the proposition that shortage of raw material cannot be made the basis for raising the demand on the ground of clandestine removal, in the absence of any evidence of conversion and removal. Reliance was also placed upon a decision of the Punjab and Haryana High Court in the case of Commissioner of Central Excise Vs. Nachiketa Paper Limited, wherein it has been held that shortage of one raw material by itself is not a ground for upholding clandestine removal. In the aforesaid backdrop, the Tribunal found that except for the disputed shortage detected by the officers in one of the raw materials all the other raw material were in accordance with the recorded balance in the statutory records. That apart from the shortage in one raw material and the statement of the Director, there was no independent evidence available on record indicating any clandestine manufacture or removal of final products. The Tribunal, therefore, extended the benefit of doubt to the Assessee and allowed the appeals by setting aside the order impugned before it.

Thus, on the basis of findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the Assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which corroborates the fact of clandestine manufacture and removal of final products. In the circumstances, on the basis of the material available on record, it is not possible to state that the Tribunal has committed any legal error in giving benefit of doubt to the Assessee.

The decision of the Apex Court in the case of Commissioner of C. Ex., Madras v. Systems & Components Pvt. Ltd. (supra) does not carry the case of the revenue any further inasmuch as in facts of the said case the Tribunal has held that the Department has not proved that the parts in question were specifically designed for manufacture of Water Chilling Plant in question. The Assessee had specifically provided technical details stating that the parts in question were used in the Chilling Plant. The Court held that once it is an admitted position by the party itself, that these are parts of a Chilling Plant and the concerned party does not even dispute that they have no independent use there is no need for the Department to prove the same. It is a basic and settled law that what is admitted need not be proved. The said decision would not have any applicability to the facts of the present case as the Assessee has disputed that there was a shortage of raw material or that there was clandestine manufacture or removal. The decision of the Supreme Court in the case of K.I. Pavunny v. Asstt. Collr. (HQ.), C. Ex. Collectorate, Cochin (supra), also would not be applicable to the facts of the present case. In the said decision the Court held thus:

It is the duty of the prosecution to prove the case beyond reasonable doubt. The evidence may consist of direct evidence, confession or circumstantial evidence. In a criminal trial punishable under the provisions of the IPC, it is now well settled legal position that confession can form the sole basis for conviction. If it is retracted, it must first be tested whether confession is voluntary and truthful inculpating the accused in the commission of the crime. Confession is one of the species of admission dealt with Under Sections 24 to 30 of the Evidence Act and Section 164 of the Code. It is an admission against the maker of it, unless its admissibility is excluded by some of those provisions. If a confession is proved by unimpeachable evidence and if it is of voluntary nature, it when retracted, is entitled to high degree of value as its maker is likely to face the consequences of confession by a statement affecting his life, liberty or property. Burden is on the accused to prove that the statement was obtained by threat, duress or promise like any other person as was held in Bhagwan Singh Vs. The State of Punjab, If it is established from the record or circumstances that the confession is shrouded with suspicious features, then it falls in the realm of doubt. The burden of proof on the accused is not as high as on the prosecution. If the accused is able to prove the facts creating reasonable doubt that the confession was not voluntary or it was obtained by threat, coercion or inducement etc., the burden would be on the prosecution to prove that the confession was made by the accused voluntarily. If the Court believes that the confession was voluntary and believes it to be true, then there is no legal bar on the Court for ordering conviction. However, rule of prudence and practice does require that the Court seeks corroboration of the retracted confession from other evidence. The confession must be one inculpating the accused in the crime. It is not necessary that each fact or circumstance contained in the confession is separately or independently corroborated. It is enough if it receives general corroboration. The burden is not as high as in the case of an approver or an accomplice in which case corroboration is required on material particulars of the prosecution case. Each case would, therefore, require to be examined in the light of the facts and circumstances in which the confession came to be made and whether or not it was voluntary and true.

Thus, the said case deals with a confessional statement of an accused in criminal proceedings, which cannot be put on a par with a statement recorded during preventive checks.

In the circumstances, there being no infirmity in the impugned order of the Tribunal, the same does not give rise to any question of law so as to warrant interference. The appeal is, therefore, dismissed.