Retraction After A Period Of 3 Years And 9 Months Was Rightly Rejected By Commissioner Of Appeals: Calcutta High Court

The Calcutta High Court has held that the alleged retraction on the grounds of the appeal filed before the Commissioner after a period of three years and nine months was rightly rejected by the Commissioner of Appeals.

The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the confessional statement of the accused, if found to be voluntary, can form the sole basis for conviction. Thus, in the absence of any valid retraction, the statement recorded by the proprietor of the appellant was admissible, and if that were so, the admitted facts need not be proved.

A search was conducted by the officers of the intelligence wing of the Central Excise Department at Shree Parashnath Re-Rolling Mills Limited (SPRML). It was alleged on the specific intelligence that they were evading Central Excise Duty by clandestinely procuring raw materials, namely M.S. billets, M.S. ingots, sponge iron, and M.S. scrap, suppressing production, and clandestinely procuring the finished goods, i.e., M.S. structural items and M.S. wire rods of various sizes. The search led to the issuance of a show-cause notice to the appellant containing various allegations, and the appellant assessee was called upon to show cause why a penalty should not be imposed on them under Rule 26(1) of the Central Excise Rules, 2002.

The sum and substance of the allegations are that the appellant assessee was involved in the clandestine removal of several metric tons of wire rods manufactured by SPRML during the period from February 1, 2012, to December 25, 2012, without cover of Central Excise invoices. The appellant-assessee appears to have knowingly concerned themselves with transporting, removing, concealing, purchasing, or selling the said goods, which they knew or had reason to believe were liable to confiscation under the provisions of the Act and the Rules framed thereunder. The allegation was that the action of the appellant assessee was deliberate, and the abetted SPRML evaded Central Excise Duty by contravening the provisions of the Act and the Rules.

The appellant assessee did not submit their reply to the show-cause notice but had belatedly submitted a reply after the Order-in-Original was passed by the adjudicating authority. The adjudicating authority, after noting the facts of the case as well as the other records, held that it is evident that SPRML was involved in clandestine removal of wire rods without payment of duty, which came to light from the data recorded in the search operations conducted on SPRML and also from the statement recorded by one Debasis Sasmal, who was the Chief Financial Officer of SPRML and had admitted the clandestine removal.

The adjudicating authority referred to the statement recorded by the Managing Director of SPRML, Anil Jain, who admitted the practice of clandestine removal of MS wire rods and evasion of duty, and SPRML voluntarily deposited an amount of Rs. 14.60 crore towards their Central Excise Duty liabilities. The brokers as well as the transporters involved in the business transaction of SPRML admitted clandestine removal of excisable goods without payment of Central Excise Duty and without Central Excise invoices. The names of the noticeees featured in the party-wise or buyer-wise details of sales of MS wire rods manufactured by SPRML were retrieved from the hard drives recovered from the secret office of SPRML, and the appellant assessee procured 543.15 MT of MS wire rods from SPRML during the period of 01.02.2012 to 25.12.2012.

A statement was recorded under Section 14 from the proprietor of the appellant assessee, Sanjay Agarwal, who admitted the procurement of MS wire rods from SPRML without any Central Excise invoices and that the payments were made in cash. After noting all the details and also taking note of the fact that the appellant assessee did not deny or dispute the charges leveled against them in the show-cause notice nor placed any evidence to dislodge the allegations, he confirmed the proposal in the show-cause notice and imposed a penalty of Rs. 26,94,687. The appellant assessee preferred an appeal before the Commissioner of Central Excise (Appeals).

The assessee preferred an appeal before the Tribunal, contending that the allegation of clandestine removal of wire rods from SPRML is based on the records received or recovered from SPRML without any corroborative evidence and without conducting any inquiry at the end of the recipient, i.e., the assessee.

The assessee contended that the onus to prove the allegation is on the person who alleges it, and therefore the department has to prove the allegation of clandestine receipt of the goods, and except for the so-called statement recorded by the proprietor of the appellant, there is nothing on record to establish the case of clandestine purchase. Any entry made in any record or by any other person, namely SPRML, is not sufficient to hold the appellant guilty of clandestine purchase. The show-cause notice that was issued was based on conjectures and surmises. No evidence has been adduced to prove the allegation of involvement in the alleged fraud in so far as it relates to or has a connection with the appellant assessee, and the entire allegation is based on conjectures and surmises without any positive evidence.

The tribunal noted that there was no retraction on the statement, which was recorded on March 11, 2014, and the contention of the assessee raised after three years and nine months after the incident at the appellate stage casting a shadow on the veracity of the statement cannot be held to be legally sustainable. This aspect was also dealt with by the Commissioner of Appeals and rejected.

The court held that a plea of retraction made after three years and nine months after the statement was recorded, on the grounds of an appeal filed within the year 2018, cannot in any manner dilute the veracity of the voluntary statement recorded on March 11, 2014. There is no allegation that there was a threat or coercion meted out to the proprietor of the appellant when the statement was recorded on March 11, 2014.

Counsel For Petitioner: Arijit Chakraborty

Counsel For Respondent: K.K. Maiti

Case Title: M/S. Anurag Steel Enterprise Versus Commissioner Of Cgst & Central Excise, Howrah Cgst & Cx Commissionerate

Case No.: CEXA NO. 14 OF 2023 I.A NO: GA 1 OF 2023

Click Here To Read The Order