CCE Vs. R.V. STEELS PVT. LTD.

JUDGEMENT

(1.) The respondents herein M/s. R.V. Steels Pvt. Ltd. are engaged in the manufacture of MS ingots and CTD bars. Evidence gathered by the authorities in the form of a statement from Shri M.R. Dhyaneshwar, Works Manager, R.V. Steels Pvt. Ltd., statements of employees of M/s. Sujana Steels Ltd. (SSL), M/s. Sujana Industries Ltd. (SIL) and proprietor of M/s. Jaiganesh Transport engaged by M/s. Sujana Steels Ltd. indicated that during the year 1997 -98 the respondents had received 450.310 MTs of iron and steel scrap imported by M/s. Sujana Steels Ltd. and converted the same into ingots without accounting the receipt of the scrap in their accounts. The 450.310 MTs of ingots manufactured from the above scrap were clandestinely cleared evading duty due of Rs. 6,21,452/ -. After due process of law the original authority demanded duty amount of Rs. 6,21,452/ - and imposed penalty of Rs. 6,21,000/ - on M/s. R.V. Steels Pvt. Ltd. under Rule 173Q of the erstwhile Central Excise Rules, 1944. He also imposed a penalty of Rs. 2,00,000/ - each on M/s. Sujana Steels Ltd. and M/s. Sujana Industries Ltd. as well as a penalty of Rs. 50,000/ - on Shri M.R. Dhyaneshwar all under Rule 209A of CER. Allowing the appeals filed by M/s. R.V. Steels Pvt. Ltd., Shri M.R. Dhyaneshwar and M/s. Sujana Steels Ltd., the Commissioner (Appeals) held the demand to be not sustainable and set aside the demand and penalties. He found that the original authority had found the charge of clandestine removal by the respondents on the basis of statements given by the employees of Ms. Sujana Steels Ltd., M/s. Sujana Industries Ltd. and M/s. Jaiganesh Transport and brokers. Relying on the decision of the Tribunal reported in : 1996 (85) ELT 260 (T) and : 1999 (107) ELT 107 (T) he found that any demand based on records of third parties without any other evidence was not sustainable in law. The original authority had relied only on statements and no other material evidence. The respondents had sought to cross -examine all the witnesses whose statements had been relied upon in finding evasion by the respondents by the original authority. Cross -examination of none of the witnesses had been allowed. The Commissioner (Appeals) found that statements of witnesses who were not produced for cross -examination by the person against whom the evidence was sought to be used could not be relied on in the proceedings. He observed that this was the ratio of the decision of the Tribunal in and the judgment of the Hon'ble High Court of Bombay in, 2000 (123) ELT 50 (Bom.). In the case of K. Harinath Gupta v. CCE, Hyderabad it was held that charges without credible corroboration such as source of procurement not established, buyers of finished goods not contacted and receipt of sale proceeds not proved would not stand against the appellants. The Commissioner (Appeals) found the ratio of the above decision applicable to the case on hand. Also in the absence of evidence such as installed capacity of the factory, raw material utilization, labour employed, goods actually manufactured and packed etc. no demand was sustainable in law as held by the Tribunal in . Accordingly, vide the impugned order the Commissioner (Appeals) vacated the order of demand and penalties passed by the original authority.

(2.) The Revenue is in appeal against the order of the Commissioner (Appeals). The following grounds have been raised in the appeal. The Order -in -Original had been passed relying on the statement of Shri M.R. Dhyaneshwar, Works Manager of the assessee. The Hon'ble Tribunal vide case law reported in had held that statement of the Production Manager had to be preferred over the statements of the Director and Supervisor, production. Hence the demand of duty and imposition of penalty appeared to be correct. The appellate authority had held that reliance could not be placed on retracted statement of Shri M.R. Dhyaneshwar. This was incorrect as the retraction by Shri M.R. Dhyaneshwar had been made after more than a year of the recording of the original statement. The Commissioner (Appeals) wrongly observed that the original authority had relied on entries in books of third parties without corroborating evidence. Recorded evidence was corroborated by statements. The statements were material evidence. Evasion cases could not be proved with mathematical precision.

(3.) The case of the Revenue was that SSL diverted imported scrap violating provisions of law and had knowingly dealt with excisable goods liable to confiscation. However, the Revenue has not challenged the order of the Commissioner (Appeals) vacating the penalty imposed on SSL. It would appear that the Revenue has no reliable case that SSL had diverted scrap unauthorizedly for manufacture and clearance of excisable goods without payment of duty thereby incurring liability to penalty under Rule 209A of the CER.