Clandestine Removal

PJ/Case Laws/2012-13/1109

Clandestine Removal - Proof of

Case:A K ALLOYS V/S. COMMISSIONER OF CENTRAL EXCISE, LUDHIANA

Citation:2012-TIOL-534-CESTAT-DEL

Issue:- Clandestine removal – panchnama not prepared – evidence regarding production not taken in lawful manner – Retraction statement alleging coercion- non-delivery of copy of Panchnama to assessee – held, principles of natural justice not followed – demand set aside.

Increase in electricity consumption - is not the criteria to determine output level.

Brief Facts:- Clandestine removal was alleged against the appellant on the ground that there was enhancement of capacity of electricity from 1199 kWh to 2250 Kwh. Reliance was also placed on the Statement taken from the person dealing with excise matter on 1.3.04. Demand was confirmed.

Matter is before the Tribunal.

Appellant’s Contention:- Appellant contended that arbitrary adjudication was done presuming the capacity of production to be 4 MTs as against installed capacity of 3 MT. Investigating team when alleged that they intervened in the process of production of appellant on 29.2.04 and 1.3.04, they did not make a panchnama nor delivered copy thereof to the Appellant to establish their allegation. Statement taken from the person dealing with excise matter on 1.3.04 was under coercion. Although statement was stated to have been recorded from Shri Kulbhusan Jain that was written by another person named Ashok Kumar Jain and Sri Kulbhusan Jain was made to sign the same.

It was contended that Shri Kulbhushan was confined in his office, the statement in question was first typed in the computer of the Appellant by Investigating team and under pressure, they directed excise person of appellant to write the same in his handwriting telling him that Shri Kulbhushan typed the statement and that was to be written by him. Manuscript of the statement was written by the excise person and that was brought to Shri Kulbhusan Jain for his signature in the capacity of Director of Appellant Company. Such statement was not recorded following due process of law for which that cannot be used as evidence against appellant. That was written behind the back of appellant and lost its evidentiary value. Therefore, by a letter dated 2.3.2004, Shri Kulbhusan made retraction of the said statement recorded on 1.3.2004 sending a complaint to the Commissioner by Regd. Post Receipt No.175 dated 3.3.2004. He specifically alleged that the manuscript statement written by Excise Clerk was not acceptable to the appellant and he categorically retracted contents thereof on the next day of recording of the statement.

Appellant contends that no legal sanctity can be attached to the above manuscript when the authorities did not give copy of Panchnama forthwith nor supplied thereafter even when request was made in that behalf. The appellant specifically made a request for furnishing copies of panchnama by his letter dated 20th September, 2005. They again made a request on 17.1.2006 to supply copies of such document while furnishing reply to the show cause notice.

It was also submitted that there was total failure on the part of Respondents to provide copies of necessary evidence when allegations were made in the show cause notice. It was submitted that when the show cause notice was issued on 8.11.2006, impugned order was passed on 8.2.2007 i.e. within three months, completely ignoring prayer of appellant to provide copies of document for which the adjudication made was total disregarding law for which that shall not sustain.

It was further submitted that there was no change of capacity of plant for no cogent or contrary evidence brought by Revenue in show cause notice. They did not make allegation of suppression of purchase of input nor did they have evidence on the allegation of clandestine removal. Suspicion however grave shall not be substitute of proof. Therefore, the adjudication made arbitrarily is unsustainable and the second appellant is also not liable to penalty.

Respondent’s Contention:- Revenue contends that there was enhancement of capacity of electricity from 1199 kWh to 2250 Kwh. His further argument was that the power consumption was higher with production as has been alleged in the show cause notice. He sought time to produce documents for contesting their case after 5 (five) years of pendency of appeal before Tribunal. It was stated that there was no proper retraction since the statement recorded was correct. Further he submits that retraction was not received in the office of the Commissioner.

Reasoning of Judgment:- The Tribunal noted that they would have agreed with Revenue had they brought evidence to record suggesting that the quantum of production alleged was due to suppression of purchase of input or there existed evidence of clandestine removal and also corroborative evidence to show enhancement of capacity by necessary electrical installation and evidence of electricity consumption or any communication of evidentiary value from electricity authority to plead higher plant capacity. There is nothing on record to show that high power connection supported by evidence was made on a particular date and that resulted in higher amount of production.

So far as the production quantum is concerned, it was noted that there is also no evidence on record to show that the authorities intervened lawfully recording the output in the presence of witnesses. When the statutory authority entered premises of assessee, the latter has every right to ask for copy of panchnama and copy of joint evaluation of production or quantum of production. Non-providing of copy of such document made the intervention unlawful. It shows that the authority had no respect to the principles of natural justice to do fair adjudication. There was no trial production done on 1.3.2004 to substantiate the allegation in the show cause notice so also no technical report was obtained by Revenue to show that 3 MTs capacity plant produce the quantity alleged by Revenue. Show cause notice did not disclose any evidence that gave rise to allegation therein. Therefore, a hypothetical case appears to have been made by Revenue in excessive exercise of its jurisdiction to the detriment of justice.

The Tribunal held that retraction statement makes a serious allegation against Revenue about unfair recording of the statement in question. The manner the statement was recorded is testimony thereof. This compels the Tribunal to say that public servants should not shake confidence of citizens on law. Had the author of the statement been asked to state the reason why he himself failed or prevented to write his statement when that was recorded by a different person and had such reason been recorded that could have established case of Revenue. Why the deponent was prevented to record his own statement remained unexplained on record. It appears that a statement written by a different person was made to be signed by a literate person. That fails to get sanctions of law. When Shri Kulbhusan does not appear to be illiterate since he has subscribed his signature in English, Revenue could have ensured recording of statement by him or recorded the reason preventing him to write his statement since Shri Ashok Kumar Jain was scribe. Further, the writer of the statement has not stated why he had written the statement and whether that was recorded according to the dictation of the Author and read over and explained to him. No believable reason has been recorded on the above, while the deponent does not appear to be illiterate. When Section 14 evidence was recorded in the manner not acceptable to law, in absence of cogent evidence to the contrary, that cannot inculpate the appellants. It is also surprising that the Department failed to provide copies of panchnama even though there were repeated requests made by Appellant to lead their defence.

In the case of R.A. Castings reported in 2011 (269) ELT 337 (Trib.) = 2008-TIOL-2732-CESTAT-DEL, Tribunal held that electricity consumption is not the criteria to determine output level. This was upheld by Allahabad High Court in R.A. Casting dismissing appeal of Revenue. SLP of Revenue was also dismissed by Apex Court as reported in 2011 (269) ELT A-108 (SC).

The Tribunal thus held that the statement has not been recorded in a manner known to law and no cogent evidence had been brought to record to prove output cleared clandestinely. No cogent evidence is on record to show either suppression of purchase of input or clandestine removal of goods in fool proof manner known to law. Impugned order set aside.

Decision:- Appeals allowed.

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PJ/Case Laws/2012-13/1109

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