The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) quashed the excise duty demand and allowed the appeal in favor of the appellant.
In this case, the appellant, Balbir Metals and Power Private Limited, was engaged in manufacturing M.S. structural items under Chapter 72 of the Central Excise Tariff. A search was carried out at the residential place of Motilal Junwal, who is the accountant of Twenty-First Century Wire Rods Limited, against whom the DGCEI officers had initiated investigations in December 2011.
Detailed discussion on filing of ITR-7 | Join Now
During the search, the private records maintained by the above-mentioned accountant were recovered, and they allegedly contained entries of clandestine supplies of billets made without payment of duty.
After the search, the department further alleged that the appellant clandestinely received 96.45 M. tons of billets, used them to manufacture structural items/rolled products of 96.45 M. tons, and cleared them without paying duty.
After the search, a show cause notice ( SCN ) dated 01.08.2013 was issued to the appellant, demanding Central Excise duty of Rs. 3,55,650/- on the alleged 96.45 M tons. The Commissioner of Central Excise, Daman, confirmed this demand with interest and imposed an equivalent penalty under Rule 25 of the Central Excise Rules 2002, by Order-in-Original dated 26-9-2017.
Detailed discussion on filing of ITR-7 | Join Now
The appellant who was aggrieved by the above order approached the CESTAT for relief.
The main issue, in this case, is whether allegations of clandestine manufacture and clearance of finished goods ( structural items/rolled products ) can be proven solely based on private records of a third party ( Billet manufacturer ) and statements from individuals who were not available for cross-examination, especially in a scenario where there is no evidence of buyers, payments, or transportation of the finished goods.
The counsel appearing on behalf of the appellant contended that there was no evidence regarding the transport of the alleged quantity of 96.45 M. tons of Billets from the factory of TFCWRL to the factory of the appellant. They further contended that there was no evidence of any payment made by the appellant to TFCWRL for the above.
The CESTAT bench observed that the revenue was unable to produce even a single evidence to support its allegation on clandestine manufacture and clearance of the finished goods from the factory of the appellant.
Detailed discussion on filing of ITR-7 | Join Now
The bench observed that the adjudicating authority has erred by violating the principles of natural justice, making the statement relied upon by the revenue inadmissible as evidence of clandestine removal.
By virtue of Section 9D of the Central Excise Act, 1944. , it was mandatory to conduct cross-examination of the witness, and thus the third-party evidence is insufficient to prove clandestine removal.
The CESTAT bench, comprising Ramesh Nair and C L Mahar, held that the demand would not be sustained as the revenue could not establish its case of clandestine removal. The appeal was allowed, and the impugned order was set aside.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
