Order Date: 29 August 2022

Facts-

• The Appellant, Shri Hari Steel Industries was inquiry by the anti-evasion branch on the basis of the intelligence that some of the Re-rolling units are engaged in large scale evasion of Central Excise Duty by way of clandestine removal of Re-rolled products. The activity of removal of excisable goods illicitly is carried out by the re-rolling units with the active help and support of brokers. 
• During the search various documents were seized. On the basis of documents drawn at the office premises of broker and with the sales report of the Appellant it was contended by Revenue that it appears that no invoices or sales bills have been issued by the Appellant for the goods mentioned in the most of the entries of the said records and the good have been removed without payment of duty and without issue of invoice. Statement of partner of Appellant was recorded wherein he admitted the removal of goods without payment of duty through the Broker.
• A show cause notice was issued, proposing demand of Central Excise Duty along with interest and penalty from Appellant and penalty under Rule 26 of Central Excise Rules 2002 on partner of Appellant and broker. By the order-in-original, the Adjudicating authority confirmed the demand of duty along with interest and penalty. 
• Aggrieved, appellant has filed this appeals.

Issue-

• Whether the penalty imposed under Rule 26 of Central Excise Rules 2002 is sustainable?

Order-

• The Tribunal observed that Department had demanded excise duty on finished goods, alleging that the Appellant have clandestinely removed the goods by relying on the broker’s records and oral statements and without any corroborative evidence either from the Appellant’s premises or from the Customers documents etc.
• Further, as per the provisions of section 9D it is clear that during adjudication, the adjudicating authority is required to first examine the witness in chief and also to form an opinion that having regard to the facts and circumstances of the case, the statements of the witness are admissible in evidence. Thereafter, the witness is offered to be cross-examined. Non-providing of the opportunity of cross-examination as in the present case amounts to violation of the natural justice and in absence of denial of natural justice, such documents/statements cannot be relied upon.
• It is well settled law that there has to be some concrete evidence in the form of receipt of raw materials, shortage of raw materials, clandestine manufacture etc. which would show clandestine manufacture of goods. It is also an admitted fact that the documents recovered from the premises of Broker are third party documents and the same cannot be relied upon without any corroborating evidence. Therefore, the entire case is based on entries found recorded in the record of the broker that does not have reliability and credibility.
• The Tribunal held that there is no sufficient material on record to establish clandestine manufacture and clearance by Appellant. Accordingly, the confirmation of demand is set aside, interest and imposition of penalty. Penalty imposed upon Partner of Appellant firm is also set aside - As regards penalty imposed upon Broker, having held that there was no clandestine removal, clearance from the factory of Appellant, penalty upon said broker cannot be upheld.
• The appeal filed by the appellant is allowed with consequential relief.