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2019 (3) TMI 1476 - AT - Central ExciseSSI exemption - dummy units - clubbing of clearances of the three units - clandestine manufacture and removal - Admissibility of evidences - section 36B of CEA - Section 9B of CEA - denial of request for cross examination - Principles of natural justice. Whether the clubbing of clearances of ADRA and Raj with ADRP (appellants herein) treating all the three units as single financial entity constituting one manufacturer, that being ADR Plastics, represented by D.Gunasingh, consequential confirmation of demand of ₹ 1,74,97,3016/- with interest and imposition of penalty on this appellant can be legally sustained or otherwise? - Held that:- In para-61 of the impugned order, the adjudicating authority has found that the statements given by raw material supplier, job worker and buyers / dealers that they have done business with ADR Group units, without bills and with bills are voluntary, truthful and unretracted statements; that the statement given by DuraiRaj, Partner of ADR Plastics and Shri D. Asir, Partner of Raj Plastics admitting that the entire business activities are managed by Shri D. Gunasingh are voluntary, truthful and unreatracted; that statements given by employees of ADR group units are also voluntary statements. It has also been noted by the adjudicating authority that Gunasingh has not retracted from his statement. Therefore, same coupled with documents seized from premises of ADR group units are substantive and corroborative evidences - Thus, there are a disturbing number of discrepancies and inadequacies in the entire proceedings which have been flagged by the Ld. Advocate. Admissibility of evidences - section 36B of CEA - Held that:- From the records it is not forthcoming if the Certificate as required under Section 36B (4) of the Central Excise Act was recorded from Ms.Amsavalli the computer operator of Raj Plastics. Hence the mandatory requirements of Section 36B ibid have been clearly followed in the breach. It is also pertinent to note that although pen drives and CPU were seized on 09.03.2010, the data therein was admittedly copied / printed out only on 20/21.05.2010, i.e after more than two months. The statement of Ms.Amsavalli, Computer Operator of Raj Plastics was recorded after a further gap of three months, on 30.08.2010. It also emerges that the said Ms.Amsavalli had joined Raj Plastics less than a month before the seizure of the pen drives, namely, on 14.02.2010. In the circumstances, we find that Ld. Advocate is correct in his assertion that the requirement of Section 36B have not been complied with; so also, the evidence of a newly joined employee (Ms. Amsavalli) cannot be relied upon - further, the printouts taken from the pen drives cannot be said to have passed the strict proceduralities mandated in Section 9B ibid and hence cannot be treated as admissible evidence. The law as laid down in Section 9D of the Central Excise Act is very clear that adjudicating authority is required to examine the witnesses before admitting the statement recorded from them as admissible evidence. There is merit in the contention of Ld.Advocate that such statements which have been recorded, relied upon and however not cross examined even after a specific request was made for the same by the appellant, cannot be considered as admissible evidence. In the case of Vijaya Samundeshwari Textiles (P) Ltd. and others [2017 (11) TMI 815 - CESTAT CHENNAI], where this very Bench, relying upon the judgment of the Hon’ble High Court of Delhi in the case of J.K Cigarettes [2009 (8) TMI 64 - DELHI HIGH COURT], held that in the absence of examination of witnesses of the cross examination, the statements are inadmissible evidence and the demand of duty based on such statements alone is unsustainable. Thus, the denial of request for cross examination by the adjudicating authority will only serve to vitiate the entire proceedings particularly when the purported corroborative documentary evidence in the form of printouts from pen drive have been held to be as failing the test of Section 36B ibid - Even otherwise, the department has not proved its case on merits. The clubbing of clearances of different units can only be done when there is irrefutable evidence that they are actually running as one with financial flow back between the units, if all the units in question are using just one set of machinery showing that each of them have manufactured and cleared goods separately and so on. The allegations of clubbing made by the department that the clearances of ADRP is required to be clubbed with that of ADRP and Raj are not on a sound or legal footing. There is no allegation that the three units have separate manufacturing set up with their own machinery. There is also no allegation that there is any transfer or use of funds between the group units and that there was financial flow back between them - There is no charge of intermingling of goods manufactured since each units manufactured different products. Each unit have separate electricity service connection, and capital of each firm is separate. Nothing has been brought on record during investigation or brought forth in adjudication to disprove or demolish the above averments of the appellant. This being so, only for the reason that D.Gunasingh is a common factor in all the three units or assists in decisions thereof, this alone cannot be a reason for holding that appellant has ‚persuasive financial control over other two units‛ and that therefore the clearances of the appellants need to be clubbed with ADRA and Raj. A number of higher appellate forums have consistently set aside the demands by the department for clubbing of clearances based on such presumptions - The Hon’ble Supreme Court in CCE Jaipur Vs Electro Mechanical Engineering Corporation [2008 (7) TMI 77 - SUPREME COURT] has inter alia upheld the finding of Tribunal that notwithstanding certain employees of three firms being common and their premises are adjoining each other, there is absence of evidence on record to prove mutuality interest or flow back of funds from one unit to another. The impugned order holding that clubbing the clearances of the appellant with ADRA and Raj by treating them as single financial entity constituting one single manufacturer, cannot be sustained and is therefore set aside - appeal allowed - decided in favor of appellant.
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