2007 (6) TMI 331 - AT - Central Excise

Penalty - Clandestine removal, proof - Held that - There is no direct evidence of clandestine removal by way of evidence like shortage of any finished goods, private records indicating production/clearance, transport document or admission by the buyers etc. At the same time, the clandestine removal stands admitted by the partner, and the duty involved stands paid - Still, this is not a case of clandestine removal proved by other corroborative evidence - appeal dismissed - decided against Revenue.

Issues: Department's appeal against non-imposition of penalty by original authority upheld by Commissioner (Appeals).

In this case, the department appealed against the order of the Commissioner (Appeals) which upheld the original authority's decision of not imposing a penalty on the appellant. The facts involved a shortage of HDPE bags at the appellant's factory, which were used for packing goods that were cleared without payment of duty. The duty was later paid, but the question of imposing a penalty remained contentious. The partner of the appellant confessed to the clandestine removal, but the case lacked direct evidence like shortage of finished goods or transport documents. The department argued for the penalty under Section 11AC, emphasizing the admission of clandestine removal and non-retraction of the partner's statements. However, the Tribunal found the case peculiar, as there was no corroborative evidence of clandestine removal besides the partner's confession. The Tribunal noted that the duty had been paid, and there were no retractions of the partner's statements. Ultimately, the Tribunal upheld the decisions of the original authority and the Commissioner (Appeals) in not imposing a penalty, considering the lack of conclusive evidence of clandestine removal beyond the partner's statements.

The main issue in this case was whether a penalty should be imposed on the appellant for clandestine removal of goods despite the duty being paid. The department sought to impose a penalty under Section 11AC based on the partner's confession and the absence of retractions. The Tribunal acknowledged the partner's admission of clandestine removal but highlighted the lack of direct evidence supporting the claim. The Tribunal noted that while the duty had been paid, there was no conclusive proof of clandestine removal beyond the partner's statements. The Tribunal emphasized the absence of corroborative evidence such as shortages of finished goods or transport documents. Ultimately, the Tribunal decided that in the absence of concrete evidence corroborating the partner's confession, the leniency shown by the original authority and the Commissioner (Appeals) in not imposing a penalty was justified.

Another crucial aspect of the case was the partner's confession regarding the clandestine removal of goods. The partner admitted to using the HDPE bags for packing goods that were cleared without payment of duty due to financial constraints. The partner's statements formed the basis of the department's case for imposing a penalty under Section 11AC. Despite the duty being paid subsequently, the department argued that the partner's confession warranted the imposition of a penalty. However, the Tribunal noted the lack of additional evidence supporting the partner's statements, such as shortages of finished goods or transport documents. The Tribunal considered the partner's confession in the context of the overall evidence and concluded that without further corroborative evidence, the imposition of a penalty was not justified in this case.

Additionally, the Tribunal deliberated on the significance of the lack of corroborative evidence in proving clandestine removal. While the partner's confession indicated the clandestine removal of goods, the Tribunal emphasized the absence of direct evidence supporting this claim. The Tribunal highlighted the importance of corroborative evidence, such as shortages of finished goods or transport documents, in establishing clandestine removal conclusively. Despite the partner's admission and the subsequent payment of duty, the Tribunal found the case lacking in additional evidence to substantiate the claim of clandestine removal. This lack of corroborative evidence played a pivotal role in the Tribunal's decision not to impose a penalty on the appellant, as the partner's confession alone was deemed insufficient to establish the offense definitively.

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