ORDER
T.K. Jayaraman, Member (T)
1. The Revenue has filed this appeal against the impugned order passed by the Commissioner of Central Excise, Trichy.
2. The issue relates to the alleged procurement of unaccounted raw materials and production and clearance of unaccounted finished products by M/s. Anjaneya Steel Rolling Mills (M/s. ASRM), Trichy. The Revenue conducted investigations on the basis of information received. Investigation revealed that M/s. ASRM received MS ingots from M/s. Elango Industries Ltd. (M/s. EIL), Karaikal. The unaccounted ingots were used for manufacture of finished products which were cleared the same clandestinely. M/s. EIL also had illicitly manufactured and cleared a quantity of 1,526.96 MTs of MS ingots without accounting them in the statutory records. Statements of following persons supported the allegation of the Revenue :
(1) G. Odayappan, Managing Partner, M/s. ASRM
(2) S.A. Premkumar Director (Technical). M/s. EIL
(3) S. Elangovan, Managing Director, M/s. EIL
(4) Sarfudeen, Managing Partner, M/s. Super Sales.
(5) MS. Mohammed Nazeer, Partner M/s. MSR Steel Agencies. Documentary evidence for removal of the goods clandestinely from M/s. EIL to M/s. ASRM from the transporter of the goods was found and the same were formed part of Annexure D to the show cause notice. Managing Partner of ASRM Shri G. Odayappan, admitted receipt of raw materials from M/s. EIL which were not accounted for. Evidence for sale proceeds in respect of unaccounted purchase from M/s. EIL by M/s. ASRM is also furnished and an employee, M. Muthuswamy, admitted that he used to deposit money in cash in the accounts of Shri Prem Kumar, Director (Technical) of M/s. EIL who has admitted sale. All the statements were recorded under Section 14 of the Central Excise Act, 1944. Shri K. Jaganmohan, Managing Partner of M/s. Rajarathina Transport admitted transport of ingots and removal to Super Sales, Trichy and M/s. MSR Steel Agencies. Mohammed Nazeer, partner of M/s. MSR Steels and Sarfudeen, Managing Partner of M/s. Super Sales, both dealers of M/s. ASRM in their statements admitted receipt of re-rolled products from M/s. ASRM. Shri S. Tamiulselvan, Office Assistant of M/s. EIL admitted that he used to accompany the lorries loaded with unaccounted ingots with dummy bills in his custody. M/s. ASRM manufactured 1,434.402 MTs of MS Rods and angles and cleared them without payment of duty and an amount of Rs. 1,25,01,626/- was transacted from Bank Account No. 5527, 1074 of Karur Vysya Bank in the name of S.A. Premkumar, Director of M/s. EIL, towards part payment for the transactions in unaccounted MS ingots. Show cause notice was also issued to M/s. ASRM demanding duty of Rs. 27,04,018.84 for unaccounted clearances of MS angles and MS bars. Penal proceedings were initiated against all the concerned persons and the case was adjudicated by the Commissioner of Central Excise, Trichy, who in his order dated 28-9-2000 confirmed duty demand also imposed equal amount of penalty under Section 11 AC of the Central Excise Act, 1944. Further, interest under Section 11AB was demanded and penalty of Rs. 50,000/each was imposed on G. Odayappan, Managing Partner, M/s. ASRM, S.A. Premkumar, Director (Technical), M/s. EIL and Shri Elangovan, Managing Director of M/s. EIL. On appeal before the CEGAT, Chennai, the Tribunal remanded the matter to the original authority for de novo consideration after affording the appellants’ opportunity including cross-examination of the persons who were not cross-examined earlier and to enable the appellants to put forth their defence effectively in the de novo proceedings. Out of seven witnesses, only S. Muthuswamy appeared for cross-examination in the de novo proceedings. It was contended on behalf of the appellants that the case is built up based on the statements and the Revenue has not discharged its onus for clandestine manufacture and removal of goods by corroborative evidence. Excepting one, all the other witnesses did not appear for cross-examination. No excess consumption of electricity was found. The alleged registers maintained by M/s. Rajarathina Transport for M/s. EIL have not been seen or signed by the assessee and the documents did not have nexus to the transaction in question. No incriminating documents were found from the residence of Odayappan to establish receipt of 1,526.96 MTs of MS Ingots and manufacture and clearance of 1,434.402 MTs of MS Rods. There is no documentary evidence for purchase of MS rods and ingots. During cross-examination, Shri Muthuswamy stated that the goods were sold through bills to both the parties and the cash received were only on the basis of billed quantity. He did not deposit any money in the Bank account of Prem Kumar. In the de novo proceedings, the Commissioner held that apart from the evidence of statements, there is no corroborative evidence available for the receipt and clandestine and unaccounted removal of raw materials and finished products. Therefore, he dropped the proceedings.
3. Revenue is aggrieved over the impugned order of the Commissioner. In the grounds of appeal, before the Tribunal, they have taken the following grounds:
It is not correct to say that the entire case is based only on statements. Apart from statements, there are other evidence to support the allegation. The raw material supplier, M/s. EIL have admitted clearance of a quantity of 1,526.96 MTs of MS clandestinely. This fact is supported by register No. 121 recovered from M/s. Rajarathina Transport. Shri Raghunathan, General Manger, M/s. EIL has admitted that he had despatched MS ingots using dummy invoices. Shri S.A. Premkumar, Director (Technical) of M/s. EIL has also admitted manufacture of ingots and clearance without payment of duty on dummy invoice to M/s. ASRM. Shri S. EIangovan, MD of M/s. EIL has also admitted unaccounted clearance to M/s. ASRM. Investigation revealed that huge amount of transaction in the bank account standing in the name of Shri S.A. Prem Kumar Director (Technical) of M/s. EIL in Karur Vysya Bank. Shri Jagan Mohan, Managing Partner of Rajarathina Transport in his statement admitted transport of ingots and removed the same to M/s. Super Sales, Trichy and M/s. MSR Steel Agencies. Shri Moahammed Nazeer, Partner of M/s. MSR Steel Agencies Shri Sarfudeen, Managing Partner of M/s. Super Sales, in their statements admitted receipt of re-rolled products from M/s. ASRM. Shri T. Tamilselvan, Office Assistant, M/s. EIL stated that he used to accompany lorries loaded with unaccounted ingots with dummy bills under his custody and that after its delivery he used to bring back the dummy bills. Therefore, the case is built up with overwhelming evidence and not simply based only on statements. Therefore, it is not correct to say that documentary evidence furnished by the Department are 3rd party evidence and that M/s. ASRM had no direct business dealings. The Hon’ble Supreme Court in the case of Collector of Customs v. D. Bhoormul reported in 1983 (13) E.L.T. 1546 (S.C.) = AIR 1974 SC 859 held that even with regard to burden in Criminal prosecution, Department is not required to prove its case with mathematical precision to a demonstrable degree and that all that it is required is the establishment of such a degree of probability that a prudent man, on its basis, believe in the existence of the fact in issue. The Commissioner has just accepted the retraction of Sarfudeen Mohammed Nazeer during crossexamination when they stated that they had purchased materials only with bills. Commissioner has relied upon the retractions to the effect that money deposited in the Bank related to construction business. Even in accepting this, there was no documentary evidence. The Commissioner has failed to consider as to what purpose cash deposits running into lakhs of rupees were made. Muthuswamy, who is a Clerk in M/s. ASRM deposited money in the account of Mr. Premkumar. The Commissioner should have dismissed the retractions as an after thought. Retractions of statements after one year is an after thought as per the decision of the Tribunal in the case reported in 1998 (97) E.L.T. 112. Since persons like Elangovan, S. Raghunathan, A. Premkumar all key persons of M/s. EIL have not appeared before the investigating authorities for cross-examination, the Commissioner concluded that their statements could not be relied upon. It was miscarriage of justice to reject the statements totally. The Hon’ble Supreme Court in the case of Duncan Agro Industries reported in 2000 (120) E.L.T. 280 (S.C.) has held that a statement given before a Customs Officer is admissible in evidence. The Commissioner has stretched the principle of natural justice beyond the reasonable limit in that he had held that the statements themselves could not be considered as evidence when the person is not available for cross-examination. Commissioner has not taken the required initiative or rather not gone on record in declaring as to why the said persons have not appeared for cross-examination. He has made a reference that the said persons had not appeared in spite of repeated summons. The Commissioner has not mentioned whether the summons were served on them or not and any personal service was made etc. Commissioner should have given opportunity to the investigating agency to counter the contentions put forth by the assessee during adjudication proceedings.
4. Shri C. Mani, learned JDR submitted that in the first adjudication proceedings, the Commissioner has held that charges have been established and in the second proceedings, he has accepted the retractions made by the witnesses. The learned JDR also reiterated the grounds taken in the appeal memo.
5. None appeared for the assessee in spite of notice.
6. We have gone through the rival contention. In any clandestine manufacture and removal to establish several links like source of raw materials, their transport, their receipts, source of funds, manufacture of finished products and their removal etc. it is not possible by any investigating agency at all time to establish complete chain of activities. In other words, as held by the Hon’ble Apex Court, it is difficult to attain mathematical precision in investigation. As far as the present case is concerned, the Revenue appears to have established that M/s. EIL manufactured ingots which they did not account for and cleared the same to M/s. ASRM who manufactured the finished products like MS rods and angles and cleared them. Statements of the concerned persons in M/s. EIL are very revealing. Statements of the persons in-charge of M/s. EIL are supported by the statements of Odeyappan, Managing Partner of M/s. ASRM, who appears to have indulged in clandestine manufacture and removal of finished products. Thus, to a great extent, the Revenue has established the relationship between supplier of the unaccounted raw material and the appellants who are alleged to have manufactured the finished products and cleared them without payment of duty. The transporter who transported the goods has also been found out. Investigation has also revealed that the money for purchase of raw materials was deposited in Karur Vysya Bank. Details of Bank transactions have also been gathered. Under these circumstances, evidence against the appellants is overwhelming. No doubt, CEGAT in its remand order directed the adjudicating authority to give opportunity for cross-examination of all the witnesses and come to a conclusion. The fact that many of the witnesses did not turn up for cross-examination cannot be any reason for dropping the proceedings. It is also seen that statements which indicated admission of clandestine manufacture and removal have been retracted after a very long time. The adjudicating authority without critical examination has accepted the retractions. This action does not appear to be correct. Adjudicating authority should have given opportunity to the Revenue to present their case also. This also has not been done. Therefore, without expressing any view on the merits of the case, we are of the considered opinion that the case is required to be remanded to the original authority for de novo adjudication. Original authority shall give notice to all the witnesses for appearing before him for cross-examination by the appellants. He shall also give opportunity to the Revenue to counter the points raised by the appellants. He should also examine the acceptability or otherwise of the retractions in the light of the various decided case laws. The adjudicating authority shall keep all the above points in mind while deciding the issue de novo. With these observations, we remand the matter.