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Judgment
Dr. Suvendu Kumar Pati, Member (J)
Confirmation of duty demand of Rs.11,89,650/- alongwith equal penalty and interest against the Appellant by the Commissioner of GST & Central Excise (Appeals), Nashik on the ground of clandestine removal of manufactured products between the period 01.04.2012 and 31.08.2012 is assailed in this appeal.
Briefly stated, facts of the case is that Appellant is a manufacturer of MS structural items falling under Chapter 72 of Central Excise Tariff Act, 1985, having centralised registration number for such manufacturing and clearance Directorate General of Central Excise Intelligence (DGCEI), Pune regional unit gathered information that Appellant had received unaccounted ship breaking scrap through one M/s. Vikram Iron, who had availed CENVAT Credit on duties shown in the invoices and Appellant received the goods without documents as well as used the same in the manufacturing process. Investigation concluded with issue of show cause-cum-demand notice on dated 19.05.2017 that was adjudicated by the Assistant Commissioner of GST & Central Excise, Nashik-II Division, Nasik who passed his detailed order on dated 08.12.2017 absolving of the liabilities of the Appellant by dropping the allegations levelled in the show-cause notice. Respondent-Department, as Appellant before the Commissioner (Appeals), challenged the legality of the said order that yielded the desired result by way of confirmation of demand, interest and penalty raised in the show-cause notice and in setting aside the adjudication order. Legality of the said order is assailed by the Assesse-Appellant before this forum.
During the course of hearing of the appeal and in his written note of the submission, learned Counsel for the Appellant Mr. Ashok Singh argued that solely on the basis of some documents allegedly recovered from third party like M/s. Vikram Steel and uncorroborated testimony of some witnesses, demand was confirmed by the Commissioner (Appeals) despite the fact that Appellant’s factory was never visited, no investigation was conducted therein, no documents were seized from the Appellants position concerning physical receipt, transferor processing and supply of finished products by the Appellant. He further submitted that learned Commissioner (Appeals) had also based his findings on the statement of Appellant recorded under threat and coercion on 22.01.2015 that was being retracted through an affidavit on 27.01.2015 i.e. within a span of five days of such recovery and gross violation of natural justice is noticeable from his order as throughout the proceedings Appellant was denied Cross examination of the proprietor/partner/agent of M/s. New Niranjan Roadlines, Somnath Roadlines, Pooja Roadlines, N.M. Roadways, Shri Hitesh Shah, partner of M/s. Gohilwad Ship Breaking Company, Proprietor/Partner of M/s. Kathiawar Steel, Alang, Virendra & Co. Aland and Mahavir Metal Corporation, whose statements were sought to be relied upon by the Commissioner (Appeals), which practice is depreciated by the judiciary even at the Apex Court level, as has been reported in 2015 (324) ELT 641 (SC) in Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II, 2006 (193) ELT 385 (Bom.) Kellogg India Pvt. Ltd., 1978 (2) ELT (J 500) (Del.) Lachhman Das, Tobacco Dealers. He rests his case by pointing out that no recovery of excessive raw material, proof of utilisation of unaccounted raw material in production process in the factory, no evidence of clearance of finished goods, no evidence regarding transportation of finished goods were available or procured by the investigating agency to substantiate clandestine removal, for which the order passed by the Commissioner (Appeals) is unsustainable both law and facts. He further placed his reliance on the judgment of this Tribunal passed in the case of Indian Metals & Ferro Alloys Ltd. V/s Collector of C. Ex and Customs [1994 (69) E.L.T. 390 (Tri.)], Alfa Castings (P) Ltd. V/s. Collector of Central Excise, Kanpur [1998 (98) E.L.T. 431 (Tri.)], Oudh Sugar Mills Ltd. V/s. Union of India [1978 E.L.T (J172)], Kapadia Dying, Bleaching and Finishing Words V/s. Collector of C.Ex, Surat [2000 (124) E.L.T 821 (Tribunal)], S.V.G Granites (P) Ltd. V/s. Commissioner of Custom & Central Excise, Hydreabad-III [2007 (210) E.L.T 712 (Tri-Bang.)], Hariyana Metals Ltd. V/s. Commissioner of Central Excise, Nagpur [2007 (214) E.L.T. 91 (Tri.-Mum)], to highlight the judicial precedent that governs the issue of clandestine clearance.
In response to such submissions learned Authorised Representative for the Respondent-Department Mr. Amrendra Kumar Jha argued in support of the reasoning and rationality of the order passed by the Commissioner (Appeals) and has drawn attention of this Bench to the fact that placing reliance on the judgment of the Hon'ble Supreme Court passed in the case of System Components Vs. CCE, Madras reported in 2004 (165) ELT 136 (SC) that is being followed by this Tribunal in the case of Gulabchand Silk Mills reported in M/s 2005 (184) ELT 263 (Tri.-Bang.), the Commissioner (Appeals) had given his findings by holding that “facts” that has been admitted need not be proved and in the instant case the Director of the Appellant Company Mr. Sasank Narayan himself had admitted his guilt and confessed about clandestine removal of the finished products, for which interference by the Tribunal in the order passed by the Commissioner (Appeals) is uncalled for.
I have gone through the submissions, relied upon judgments, written note of argument submitted by the Appellant and perused the case record. As could be noticed, Appellant’s factory was never visited by the Investigating Agency nor any seizure of document was made therefrom. Adjudicating Authority had observed in his order about the points raised before this Tribunal by the Appellant in fair detail including the fact that no such seizer being conducted in the Appellants factory, no seizer of invoices or other documents relating to delivery prove of raw material etc., nor any assessment of availability of raw material was made during the investigation. Further, in para 4.4 and 4.5 of his order, he has clearly noted that premises of M/s Vikram Steel was searched on 17.09.2012 and after a gap of 28 months statement of the Director of the Appellant Company Mr. Sashank Nair Kolapkar was recorded on 22.01.2015 and thereafter without any other evidence except statement of some witnesses, not connected with Appellant’s factory work, demand was raised against the Appellant. More importantly, it has been recorded in para 4.2 of his order that statement of the said Director was recorded in English and explained in Marathi and cross examination of panch witness, officers as well as co-accused were not permitted in gross violation of principle of natural justice. On the other hand, learned Commissioner (Appeals) has justified admissibility of the evidence of those witnesses by apparently invoking Section 32(2) of the Indian Evidence Act and discarded the retracted statement of the Director in placing reliance on the judgment of this Tribunal passed in the case of Commissioner of Central Excise, Mumbai Vs. Champion Confectionery as reported in 2010 (262) ELT 865 wherein it has been held that retraction, if any, made should be made before the authority to whom statements were given. Further in placing reliance on the judgment of the Hon'ble Apex Court in System Components, cited supra, he confirmed the duty demanded on the Appellant alongwith interest and penalty by holding that clandestine clearance was established.
After going through contradictory findings made in the Order-in-Original and Order-in-Appeal, it would be worthwhile to further analyse the reasoning given in their respective orders. First, on the point of the observation that admission needs no further prove, as has been held by the Hon'ble Supreme Court in System Components case that is being relied upon by this Tribunal in the case of Gulabchand Silk Mills supra, there is a clear finding that ‘recovery of unaccounted goods was made’ and as because clandestine clearance is very difficult to establish in linking each chain of the circumstances admission of the person involved, in view of provision contained in Section 56 of the Indian Evidence Act, is to be taken as best piece of evidence to establish guilt of the delinquent but in the instant case, no recovery of any goods had taken place to apply the judgment to the facts of this case. Second, what is required to be discussed here is that Appellant was denied with the opportunity of cross examination of the witnesses basing on whose statements, demand was confirmed and in this connection, it would be of great importance to reproduce para 6 of the judgment of the Hon'ble Supreme Court passed in the case of Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II reported in 2015 (324) ELT 641 (SC), that explains the basic requirement of cross examination and states the order to be a nullity if principle of natural justice is violated in denying cross examination. It reads:
“6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.”
And the third important point that needs consideration and analysis is the retracted statement of the Director. The contention of the Appellant is that under coercion and duress statement of the Director was recorded. This may be true in most of the cases in which investigation is carried out by agencies who have authority also to prosecute the offenders, for which the statement recorded before those authority could not be taken as a statement given voluntarily or on free will despite the fact that Section 25 of the Indian Evidence Act would not applied to the statement recorded by Revenue Officials, as they are treated at par with Police. Retraction made subsequent to such statement could be bona fide or could be made after thought but again communicating the said retraction to the investigating authority is fraught with danger and is beyond the competency and courage of an ordinary human being to venture into. That operator in the instant case no recovery of unaccounted goods was made, placing reliance on the judgment of System Components, cited supra would be of no benefit to the Department to establish the allegation of clandestine of removal. Apart from confessional statement, nothing noticeable is found in the order of the Commissioner (Appeals) that would substantiate the allegation and discard the order passed by the Adjudicating Authority. Hence the order.
THE ORDER
The appeal is allowed and the order passed by the Commissioner of GST & Central Excise (Appeals) Nashik vide Order-in-Appeal No. NSK/EXCUS/000/APPL/743/18-19 dated 28.02.2019 is hereby set aside, with consequential relief, if any.