Citation Codes

Equivalent Citations

citation codes

Case Number

Tax Appeal No. 143 of 2014, Tax Appeal No. 144 of 2014, To, Tax Appeal No. 146 of 2014

Attorney(S)

Ms. Amee Yajnik, Advocate for the Appellant(s) No. 1

Judges

Akil Kureshi
Sonia Gokani, JJ.

Acts

SECTION 11 C CENTRAL EXCISE ACT

See more information ...

Smart Summary

Summary of Common Order (Per: Honourable Ms. Justice Sonia Gokani)

Factual and Procedural Background

These Tax Appeals arise from an order of the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad (CESTAT) dated 15 July 2013. Revenue challenged the CESTAT order by raising substantial questions of law.

The respondent-assessee is Messrs. Saakeen Alloys Private Limited, a manufacturer of CTD/round bars located at Visnagar-Mahesana Road, District Mehsana. Simultaneous searches were carried out at the premises of Saakeen Alloys and Sunrise Enterprises, resulting in recovery of three notebooks and one pen-drive containing alleged details of illicit clearances. On 24 November 2007, searches at M/s. Khodiyar Transport Services recovered documents including invoices issued by Saakeen Alloys. A statement of Mr. Mohammed Altaf Alambhai Kapadia connected with Saakeen Alloys was recorded on 23 November 2007 and was retracted shortly thereafter. A statement of the proprietor of Sunrise Enterprises — initially admitting being the main supplier to Saakeen Alloys — was also retracted soon after. Statements of the proprietor of Khodiyar Transport Service and the Excise Manager of Saakeen Alloys were recorded; panchnama and other documents were drawn based on the seized pen-drive.

On the basis of the material, the Commissioner of Central Excise issued a show cause notice dated 7 October 2010 demanding duty of Rs. 1,93,26,138/-. Of this amount, approximately Rs. 1.85 crores was based on data in the notebooks and pen-drive recovered from Sunrise Enterprises, and approximately Rs. 8.50 lakhs from parallel invoices recovered from the transporter’s office. An order-in-original dated 7 October 2010 confirmed the demand; the Commissioner on appeal also confirmed the demand and imposed matching penalties.

The respondent-assessee approached the Tribunal. The Tribunal, by its impugned order dated 15 July 2013, set aside the demand of Rs. 1.85 crores but confirmed the duty demand of Rs. 8.25 lakhs and penalties under Section 11(c) of the Central Excise Act. The Revenue has filed these Tax Appeals challenging the Tribunal's conclusions.

Legal Issues Presented

“Whether the CESTAT, while passing Order No. A/10817-10820/WZB/AHD/2013 dated 15.07.2013, was correct in holding that there is no evidence of illicit clearance available despite holding that there are suspicion of illicit clearance and the Department proved the entire modus of illicit clearance on sample basis?”
“Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/10817-1820/WZB/AHD/2013 dated 15.07.2013, was correct in holding that evidences collected by Departments are admissible evidences only for one offence while the same set of evidences only for one offence while the same set of evidence are insufficient to establish another offence?”
“Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/10817-1820/WZB/AHD/2013 dated 15.07.2013, was correct in admitting the evidences for the past clearance and ignore the evidences for the remaining clearances?”
“Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/10817-1820/WZB/AHD/2013 dated 15.07.2013, was correct in holding that the statement has been retracted even though the same person has admitted the depositions made in the retracted statements in his statement recored subsequent to the retraction?”

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court reviewed the Tribunal's factual findings and legal approach. The Tribunal had examined the material at length and applied the principle that, in cases of clandestine removal (evading excise duty), positive and cogent evidence is required to establish evasion. The Tribunal found the following factual and evidentiary landscape:

Recovered material included notebooks and a pen-drive from Sunrise Enterprises, and parallel invoices from the transporter's premises.
Confessional statements were recorded (e.g., of Mr. Mohammed Altaf Alambhai Kapadia and the proprietor of Sunrise Enterprises) but these statements were retracted shortly after being recorded.
The opportunity for cross-examination of certain persons (for example, the person in charge of records of Sunrise Enterprises) was not afforded, limiting the ability to test those statements.
There was an absence of corroborative positive indicia of evasion such as records showing excessive purchase of raw material, shortage of finished goods, excess electricity consumption, seizure of cash, etc.

Applying these factual findings, the Tribunal concluded that the demand of approximately Rs. 1.85 crores—based primarily on data in the notebooks and pen-drive and on confessional statements that were retracted—could not be sustained in the absence of cogent corroborative evidence and without cross-examination of material witnesses. By contrast, the Tribunal found independent and corroborative evidence in relation to the smaller sum recovered from the transporter's premises (approximately Rs. 8.25 lakhs), namely parallel invoices that were confirmed by the proprietor of the transporter and supported by independent evidence. The Tribunal therefore set aside the large demand but sustained the lesser demand and associated penalties; the court found no perversity in that approach.

Holding and Implications

Final Disposition: Both Tax Appeals are DISPOSED OF.

Direct effects of the decision on the parties:

The Tribunal's setting aside of the demand of approximately Rs. 1.85 crores (which was based largely on notebooks/pen-drive data and retracted confessional statements) is affirmed as being properly based on factual and evidentiary insufficiency.
The Tribunal's confirmation/sustaining of the duty demand of approximately Rs. 8.25 lakhs—based on parallel invoices recovered from the transporter's premises and supported by independent evidence—is accepted.
Penalties imposed on certain persons (Managing Director, proprietors and others) based on the substantiating material were treated as proper and required no further indulgence.

Broader implications: The opinion records that the appeals did not raise any substantial question of law warranting interference; it emphasizes that confessional statements, particularly when retracted and unsupported by cogent corroborative evidence (and where cross-examination was not permitted), cannot alone sustain a finding of clandestine removal and consequent duty liability. No new legal precedent was announced.

Show full summary ...

To access the original judgment, please Sign In or Subscribe.

Commissioner Of Central Excise (S) v. Saakeen Alloys Pvt. Ltd. Opponent(S)

COMMON ORDER

(PER: HONOURABLE Ms. JUSTICE SONIA GOKANI)

Since all these Tax Appeals contain common questions of facts and law, they are being decided by this common order.

Challenging the order of the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad (“CESTAT” for short) dated 15th July 2013, Revenue has challenged the same in both these Tax Appeals, raising the following substantial questions of law for our consideration:-

(a) “Whether the CESTAT, while passing Order No. A/10817-10820/WZB/AHD/2013 dated 15.07.2013, was correct in holding that there is no evidence of illicit clearance available despite holding that there are suspicion of illicit clearance and the Department proved the entire modus of illicit clearance on sample basis?”

(b) Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/10817-1820/WZB/AHD/2013 dated 15.07.2013, was correct in holding that evidences collected by Departments are admissible evidences only for one offence while the same set of evidences only for one offence while the same set of evidence are insufficient to establish another offence?”

(c) Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/10817-1820/WZB/AHD/2013 dated 15.07.2013, was correct in admitting the evidences for the past clearance and ignore the evidences for the remaining clearances?”

(d) Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/10817-1820/WZB/AHD/2013 dated 15.07.2013, was correct in holding that the statement has been retracted even though the same person has admitted the depositions made in the retracted statements in his statement recored subsequent to the retraction?”

We have heard learned counsel Ms. Amee Yagnik for the Revenue and with her assistance, examined the material on record. In the following factual background, these appeals arise.

Messrs. Saakeen Alloys Private Limited, which is engaged in the manufacture of CTD/Round bars, is situated at Visnagar-Mahesana Road, District Mehsana. On the premises of Messrs. Saakeen Alloys Private Limited and Messrs. Sunrise Enterprises, Mahesana simultaneous searches were carried out wherein three note-books and one pen-drive were recovered containing details of illicit clearances made by the said M/s. Saakeen Alloys Private Limited. On 24 November 2007, at the business premises of M/s. Kodiyar Transport Services, Mahesana search was carried out and various documents containing the invoices issued by M/s. Saakeen Alloys Private Limited were recovered. Statement of one Mr. Mohammed Altaf Alambhai Kapadia connected with Messrs. Saakeen Alloys Private Limited was recorded on 23rd November 2007 which was, within a short time, retracted. Statement also was recorded of the proprietor of M/s. Sunrise Enterprises where he agreed to be the main supplier of Messrs. Saakeen Alloys Private Limited. This statement too was retracted very soon. Likewise, statements of proprietor of M/s. Khodiyar Transport Service, Mahesana and Excise Manager of Messrs. Saakeen Alloys Private Limited were recorded and on the basis of pen-drive seized, panchnama and other documents were drawn. On the basis of entire material, show cause notice was issued by the Commissioner of Central Excise dated 7 October 2010 demanding the duty amounting to Rs. 1,93,26,138/-. Out of this total amount, Rs. 1.85 Crores [rounded off] was based on the data contained in the note-books and pen drive recovered from Messrs. Sunrise Enterprises and remaining Rs. 8.50 lakhs [rounded off] from the parallel invoices recovered from the office of the transporter - M/s. Khodiyar Transport Services.

The order-in-original was passed on 7 October 2010 confirming the entire demand mentioned in the show cause notice. This was when challenged before the Commissioner of Central Excise, it confirmed the demand and imposed matching penalty.

Aggrieved by such action of both - order in original and that of the Commissioner, the Tribunal was approached by the respondent-assessee and the Tribunal, vide its impugned order, set-aside the demand of Rs. 1.85 Crores confirming the duty demand of Rs. 8.25 lakhs as also the penalties under Section 11 (c) of the Central Excise Act. Therefore, the present appeals raising aforementioned questions of law.

As can be noted from the decision of the Tribunal, it has extensively dealt with the entire factual matrix presented before it. The Tribunal rightly concluded that in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below.

As could be noticed from the material on record that for the remaining amount of Rs. 8.25 lakhs from the transporter's premises, the parallel invoices were recovered which not only were confirmed by the proprietor of the said transporter but independent evidences also affirmed the same. The Tribunal has chosen to sustain such amount levied in order-in-original and in the appellate order of the Commissioner.

Penalties imposed on some of the persons being the Managing Director, the proprietors and others on the basis of such material also hardly requires any indulgence.

All the appeals are based predominantly and essentially on factual matrix. The Tribunal elaborately and very correctly dealt with the details furnished by both the sides and rightly not sustained the demand of Rs. 1.85 Crores, which had no evidences to bank upon. Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax, much less the retracted statements. To the extent there existed substantiating material, Tribunal has sustained the levy. No perversity could be pointed out in the approach and treatment to the facts.

Appeals since do not raise any question of law, much less substantial question of law, deserves no consideration. Accordingly, both these Tax Appeals are disposed of.

Commissioner Of Central Excise (S) v. Saakeen Alloys Pvt. Ltd. Opponent(S)

Summary of Common Order (Per: Honourable Ms. Justice Sonia Gokani)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Commissioner Of Central Excise (S) v. Saakeen Alloys Pvt. Ltd. Opponent(S)

Comments