TMI Blog2022 (8) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... hed a different conclusion in this regard, had the retractions been produced before him by the co-appellants/ deponents concerned. In any case, the inherent contradictions and discrepancies in the statements given by each co-appellant/ noticee, as elaborated in page nos. 11-13 of the Company s Written Submissions, militate against the evidentiary value attached to the purported incriminating statements, even if the original statements were to be held as admissible. Failure on part of the adjudicating authority to adhere to prescriptions of Section 9D of the Act - HELD THAT:- Section 9D(1) of the Act sets out the circumstances in which a statement made and signed before a Gazetted Central Excise officer shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the truth of the facts contained in the statement made during the course of enquiry/investigations before a Gazetted Central Excise officer, has to be proved by evidence other than the statement itself - the adjudicating authority could not have straightaway relied on the purported incriminating statements of Sri Sanjib Mahapatra, Sri Prahraj Swain and Sri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were also recorded. The Central Excise Officers detected huge shortage in stock of finished goods as compared to the stock recorded in the Company s Daily Stock Account register, which had purportedly been removed in a clandestine manner without payment of duty. Subsequently, amounts totalling to Rs.30,00,000/- were recovered from the Company towards its purported Central Excise liabilities. ii. After conclusion of investigations, a show cause notice dated October 8, 2009 was issued, alleging that the Company had clandestinely removed finished goods being 7541.420 MTs of MS Rods and 508.900 MTs of MS Angles in contravention of several provisions of the Act and the Rules and whereon Central Excise duty totalling to Rs.2,72,39,036/- together with interest and equivalent penalty was payable. By relying on certain incriminating statements of Sri Sanjay Gadodia, Sri Sanjib Mahapatra and Sri Praharaj Swain aforesaid, the said show cause notice alleged, inter alia, that clandestine removal of short-found goods, as detected through joint stock taking, had been admitted. The said show cause notice also proposed imposition of personal penalties against the Company s personnel, namely, Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legality of the Panchnama proceeding. In any case, since the Panchnama in question was a typed document, it ought to have borne a declaration that the contents thereof were in tune with what the panchas had seen, which was missing. A Panchnama drawn in contravention of the mandatory legal requirements is nonest, as laid down in the decisions of Yaqub Abdul Razak Memon v. State of Maharashtra, reported in 2013 (13) SCC 1 and Raghuveer Ispat Pvt. Ltd. v. Commissioner of Central Excise Service Tax, reported in 2018 (360) ELT 535(T). II. Even otherwise, the Panchnama lacked true and complete details of the events that had taken place during the course of search operations on November 4, 2008 and November 5, 2008. The Panchnama had merely stated that, because verification work could not be completed on November 3, 2008 the panchas had been requested to come back and witness the verification work on the subsequent day i.e. November 4, 2008 and as such work, again, could not be completed on the said date, the panchas had been requested to remain present on November 5, 2008 also. The Panchnama only spoke about weighment of few M.S. Rods , but there was no whisper about any weighment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by Sri Sanjay Godadia, Sri Sanjib Mahapatra and Sri Praharaj Swain aforesaid had been duly retracted and the said purported statements could not have been treated as admissible evidence. The said purported statements had been obtained by the Department under threat and coercion, when the deponents/co-appellants had been forced to accept the allegations of physical shortages and clandestine removal. In particular, Sri Sanjay Godadia aforesaid, who had been suffering from ill health, had been threatened with arrest, as a result whereof he had been compelled to seek anticipatory bail from Court. It was also submitted that nothing turned on the Department s objection that the retractions in question had not been furnished to the adjudicating authority, inasmuch as the adjudicating authority had proceeded on the basis that the said retractions were before him and that the said retractions lacked credibility. None of the purported incriminating statements could have formed substantive basis of the alleged charge, in the absence of corroborative evidence and in any case, there could not have been any corroboration of evidence which was itself deficient. In this behalf, reliance was pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermoware P. Ltd., reported in 2011 (266) ELT 45 (Guj.); (v) Raj Ratan Industries Ltd. v. Commissioner, reported in 2013 (289) ELT 482 (T); (vi) ShivalayaIspat Power v. Commissioner, reported in 2017 (357) ELT 742 (T); (vii) Super Smelters Ltd. v. Commissioner of Customs, Central Excise Service Tax, reported in 2020 (371) ELT 751 (T) 5. The Authorized Representative for the Revenue reiterated the findings in the impugned Order-In-Original. In particular, it was submitted that the charge of clandestine removal had been admitted by the Company s personnel, namely, Sri Sanjay Gadodia, Sri Sanjib Mahapatra and Sri Praharaj Swain aforesaid. Also, shortage in physical stock detected as a result of joint stock verification clearly proved that the Company had indulged in clandestine clearance of huge quantities of finished goods. In any case, the objections relating to invalidity of the Panchnama had never been urged before the adjudicating authority and, further, there was no such ground taken in the Company s appeal petition before the Tribunal. In the circumstances, no interference with the impugned Order-In-Original was warranted. 6. We have perused the entire appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck taking, weighment slips etc. have been treated as non-relied upon documents by the revenue, which is rather astonishing. In several decisions rendered by the Tribunal, as discussed in detailed in the subsequent paragraphs, it has been consistently held that stock taking has to be conducted in a proper manner, duly supported by materials such as weighment slips, counting slips etc., in the absence of which physical shortage of stock cannot be taken to have been established. 8. The Company had seriously questioned the manner and method of stock taking conducted by the Central Excise Officers in this case. We cannot agree with the submissions of the Ld.Authorized Representative in his written submission that the assessee had failed to raise objections against stock-taking process before the original authority. One may refer to Paragraph Nos. 2.10, 2.15, 2.18 and 2.19 of the Appellant company s reply to the show cause notice at page Nos.137, 139 and 141 of the Appeal paper book in this regard. Such objections have also been raised by the Appellant in their grounds of appeal. The decisions relied on by the Authorized Representative for the department in his written submissions, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso we would not have come to a different conclusion as to the accuracy and reliability of the stock verification of the goods.We also find that, according to the joint stock verification reports, nearly 650 MTs of materials had been physically weighed between 9.30 a.m. and 5.00 p.m. on November 5, 2008. This is despite the fact that the printer attached to the Weight Bridge had gone out-of-order on November 5, 2008 and hence, weighments had to be recorded manually for each load on the said date, as recorded in the Panchnama. We find considerable force in the arguments of the Ld.Advocate that proper physical weighment of about 650 MTs of M. S. Angles of assorted size, M. S. Rods of assorted size, M.S. Ingots and general Scrap could not have been carried out in a short span of 6 to 7 hours time. The Ld.Authorized Representative for the Revenue had also found it quite difficult to justify that nearly 650 MTs of M.S. Angles, M.S. Rods and M.S. Ingots had been physically weighed in a proper manner in a span of 6 to 7 hours. The adjudicating authority had taken an erroneous view of the matter by observing that average weighment of stock arrived at by weighing a sample piece of M. S. Ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor described the method of stock taking to counter the case. The only contention is that the small quantity was lying in the factory premises and therefore, the weighment was done easily. I am unable to accept the contention of the Revenue without any basis, such as, the details of the weighment etc. 8. The Tribunal consistently observed in various decisions that stock verification cannot be conducted by a rough estimation . 9 . Upon analysis of the above cases it is seen that the judicial view is that the stock taking would be conducted in a proper manner, which is obviously supported by some material such as, weighment slip, counting slip etc., as the case may be. It cannot be on the basis of eye estimation or otherwise. The Hon ble Gujarat High Court observed that the mere statement of the representative of the assessee at the time of stock verification is not sufficient which was retracted subsequently. The confessional statement of an accused in criminal proceedings cannot be put on at par with a statement recorded during preventive checks. In the present case, I find that there was a huge stock as shown in DSA. The assessee claimed that the said materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight method basis and, therefore, mere admission by the Directors, who deposited the duty for the shortage, is not enough to proof that the goods were clandestinely cleared from the appellant factory. We have also considered the judgment cited by the appellant in case of C. C. Ex., Lucknow v. M/s. Sigma Castings reported at 2012 (282) E.L.T. 414 (Tri.-Del.), M/s. Micro Forge (I) Pvt. Ltd. v. C. C. Ex., Rajkot reported in 2004 (169) E.L.T. 251 (Trib.- Mumbai),C.C.Ex. Indore v. M/s. Kapil Steel Ltd. 2006 (204) E.L.T. 411 (Tri.-Del.), C.C.Ex., Lucknow v. M/s. Kundan Casting (P) Ltd. reported at 2008 (227) E.L.T. 465 (Trib.-Del.), M/s. RHL Profiles v. C.C.Ex., Kanpur reported at 2013 (290) E.L.T. 247 (Trib.-Del.). In view of the findings contained in these judgments we hold that the shortage detected on average basis is not sustainable and, therefore, we set aside the demand. 21 . We have considered the submissions made by the other appellants as regard penalty imposed against them. We find that no material evidence was brought on record to prove the charges to attract penalty against them, except the statements which were relied upon by the department without following the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the said findings in this behalf are liable to be held as untenable. On a query from this Bench, the Ld.Advocate submitted that necessary averments as to the retraction of the aforesaid purported statements had been made in the replies to the show cause notices and other communications of the appellants/noticees. In our view the adjudicating authority would not have reached a different conclusion in this regard, had the retractions been produced before him by the co-appellants/ deponents concerned. In any case, the inherent contradictions and discrepancies in the statements given by each co-appellant/ noticee, as elaborated in page nos. 11-13 of the Company s Written Submissions, militate against the evidentiary value attached to the purported incriminating statements, even if the original statements were to be held as admissible. Several decisions have been relied upon by the Ld. Authorized Representative for the department at pages 6-8 of his written submissions in support of his argument that the retractions were inadmissible and had been rightly discarded by the adjudicating authority. However, it has not been shown to us as to how the said decisions are applicable in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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