By TIOL News Service

MUMBAI, NOV 09, 2017: A SCN came to be issued demanding duty on 18,23,575 kg. of Jarda for the period 1994-95 till 1997-98, penalty and interest were also proposed to be levied.

The Commissioner of Central Excise computed and confirmed the duty demanded on the quantity of Jarda removed clandestinely upto February 1997 at Rs.3,76,49,018/- and imposed an equal amount of penalty under Section 11AC. The seized Jarda in the 90 cartons and the vehicle were also confiscated but were allowed to be released on payment of redemption fine. Personal penalties were also imposed on other persons and the partners and employees of RKPTM.

In the first round of appeal, the Tribunal remanded the matter as the appellants contended that they were denied an opportunity of cross examining all the witnesses. In denovo proceeding, summons were issued to the witness and the demands were confirmed again.

Appeals before the CESTAT met with success as the Tribunal vide its order dated 1st July, 2005 allowed the appeal on merits.

The Tribunal observed that the case against the appellant was based on the oral statements of the witnesses concerned including that of the assessee and employees together with the record of supplies of raw tobacco and transporters, the matter essentially involved the appreciation of direct and circumstantial evidence.

It is against this order that the Revenue is in appeal before the High Court.

The solitary question of law is -

Whether in the facts and circumstances of the case, the CESTAT was correct in law rejecting the evidences recorded/collected in an inquiry conducted under Section 14 of the Central Excise Act, 1944 which is deemed to be "judicial proceedings" under Sub-Section (3) of Section 14 ibid, within the meaning of Section 193 and Section 128 of the Indian Penal Code, 1860?

After considering the submissions, the High Court inter alia observed -

+ The Tribunal found that the Commissioner had mainly relied upon the statements of the transporters and suppliers of raw materials and others. Many of them had retracted their statements almost immediately. According to the respondents, the statements were retracted in view of the fact that they were obtained by exercising undue influence . Therefore, it was not binding upon the respondents. The raw material suppliers from Gujarat have given their statements first to the Gujarat Central Excise Officers in Gujarati. Their statements were also recorded a second time and this time by the Central Excise Officers of Nashik who have recorded their statements in the English language. The English statements were at variance with the earlier statements but the statements recorded in English are relied upon by the Commissioner .

+ The revenue was required to prove their case by cogent and positive evidence. It had to prove receipt of raw materials and unaccounted production. This they failed to do.

+ The Tribunal came to the conclusion that most of the witnesses had retracted their statements on the basis that their statements were obtained under duress and coercion. None of these statements were voluntary and the Commissioner had relied upon different versions of their original statements. The Tribunal also observed that after perusing the documentary evidence relied upon by the Commissioner that the transport receipt, goods challans and other documents did not bear acknowledgments of any of the respondents for having received the consignment of tobacco.

+ We find no reason to fault the impugned order which has gone to great depth in appreciating the evidence before the Commissioner and as a last fact finding authority, the Tribunal observed that there are major discrepancies and contradictions including those references made by the Commissioner to the various demand drafts said to have been obtained.

+ The settled legal position for establishing clandestine clearances is that there had to be a strong body of evidence which the Tribunal found was lacking in the present case. The Tribunal found that the evidence of drivers would have been useful in proving a fact of supply of raw tobacco at a particular destination but the revenue had not recorded the statements of any of the drivers of transporters of raw tobacco. On the date of interception of 90 cartons of raw tobacco, immediate verification carried out of the stock in the respondent's factory did not reveal any shortage or excess and there was no evidence of unaccounted production or clearance.

Concluding that the Tribunal had correctly come to the conclusion that the order of confiscation of 90 cartons of Jarda and the demand made of Central Excise duty upon the main respondent and imposition of penalty and interest cannot be sustained, the Revenue appeal was dismissed.

(See 2017-TIOL-2342-HC-MUM-CX)