In a recent ruling, the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) of Kolkata held that statements retracted during cross-examination have no evidentiary value and cannot be relied upon for demanding excise duty.
The assessee, M/s. Ramgarh Sponge Iron Private Limited, was alleged to be evading central excise duties amounting to Rs. 12.69 crore through alleged clandestine clearances of sponge iron between September 2010 and April 2013.
The case began with a raid by the Directorate General of Central Excise Intelligence (DGCEI) at the assessee-company’s premises and those of its tax consultant, Om Prakash Singh. During the raid, electronic devices containing records of transactions were seized, and statements were recorded from several employees. The authorities alleged that the assessee-company used fake invoices issued by two firms, Ganesha Industries and Vinayak Enterprises, to carry out undeclared sales of sponge iron. Based on this evidence, the tax authorities demanded Rs. 12.69 crore in unpaid excise duty, along with penalties.
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However, during cross-examination before the tribunal, key witnesses, including Om Prakash Singh, retracted their earlier statements, claiming they were made under coercion. Singh, who had originally admitted to his involvement in the alleged transactions, stated that his confession was obtained through duress. Additionally, the tribunal observed that the evidence extracted from the electronic devices was inadmissible, as the proper procedures under Section 36B of the Central Excise Act, which governs the use of electronic records, were not followed. The tribunal noted that no certification was provided to authenticate the data, and the individuals responsible for entering the data were not identified.
The bench of Mr Ashok Jindal and Mr Anpazhakan further highlighted that under Section 9D of the Central Excise Act, statements used as evidence must be tested through cross-examination to establish their credibility. Since this process was not properly followed in this case, the tribunal ruled that the retracted statements could not be relied upon to substantiate the excise duty demand.
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In light of these findings, the CESTAT quashed the demand for Rs. 12.69 crore in excise duties and the accompanying penalties, including those imposed on Singh and Director of the assessee company, stating that without credible evidence, the claims could not be sustained.
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