No excise duty leviable u/s 11A of Central Excise Act for allegation of illicit clearing in absence of evidence relating to inflow of cash: CESTAT [Read Order]

The Mumbai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that no excise duty was leviable under section 11A of the Central Excise Act, 1944 on the allegation of illicit clearing in the absence of evidence relating to the inflow of cash and allowed the appeal by Parvati Steel Rolling Mills Pvt. Ltd (The Appellant against the Commissioner of Central Excise (CCE) (The respondent).

On an investigation, the department came to the conclusion that the appellant had clandestinely manufactured and cleared 3635.715 MT of MS bars of various sizes, and show cause notices were issued demanding Rs.1,07,14,072.00 for illicit clearance of TMT bars as per Rule 4 and Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A (1) of the Central Excise Act, 1944 and penalty under section 11AC of the Central Excise Act, 1944. The Adjudicating Authority confirmed the demand of duty with interest and penalty.

The counsel who appeared on behalf of the appellant submitted that the entire case was based on some diary or documentary that was allegedly recovered and the statements of third parties and the demand/penalties were also confirmed by the adjudicating authority on that basis which is contrary to the settled legal position and that there was no evidence of clandestine clearance during the relevant period and the demand has been quantified on speculation based on some theoretical calculation.

The counsel also submitted that the demand cannot be sustained merely based on third-party statements without any evidence of procurement of raw materials and clearance of finished goods. The counsel further submitted that they had requested for cross-examining the witnesses but the Adjudicating Authority rejected it, and since the cross-examination of other witnesses had not been allowed, their statements could not be relied on. He also submitted that there was no compliance with Section 9D of the Central Excise Act, of 1944.

The counsel who appeared on behalf of the revenue submitted that the appellants could not justify the requirement of cross-examination, therefore the same was rightly rejected by the Adjudicating Authority. He further submitted that this was a clear case of clandestine removal against the appellants and therefore the duty and penalties were rightly imposed. The counsel further relied on the decision of the Supreme Court in the case of Muddasani Venkata Narsaiah (Dead) through L.R. vs. Muddasani Sarojana (2016) for the rejection of cross-examination request by the adjudicating authority.

The two-member bench consisting of Ajay Sharma (Judicial Member) and C J Mathew (Technical Member) after hearing both sides held that “In view of the discussions made hereinabove, we are of the considered view that the department has miserably failed to substantiate the allegation of clandestine manufacture and clearance by any tangible or corroborative evidence and the diaries or pen-drive from a third party cannot be said to be sufficient proof of such allegation and the department has failed to make out a case beyond any doubt” and the appeal was allowed.

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