2007 (1) TMI 559 - HC - Central Excise

Clandestine manufacture and removal - Held that - the Department has failed to establish any unaccounted production or non-duty payment removal of PTY, even otherwise Tribunal has found that the period for which the Department wants to impose duty is barred by limitation. The assessing authority wants to impose duty on the basis of statement which was later on retracted - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Admissibility of confessional statement for confirming demand under Section 11A of C.Ex. Act and proving suppression of facts.
2. Requirement of catching actual clandestine removal to prove goods were clandestinely removed.
3. Evidential value of non-statutory records seized during preventive checks.

Issue 1: Admissibility of Confessional Statement:
The Tribunal analyzed the alleged unaccounted quantity of PTY based on theoretical calculations and assumptions, concluding that such assumptions cannot uphold the charge of clandestine production. The Tribunal rejected the claim of unaccounted production as the evidence did not support it, citing the Supreme Court decision in Oudh Sugar Mills. The Tribunal also disregarded the plea regarding shifting oil and work in progress, stating that the confirmation of demands was not justified. The absence of relevant material about unrecorded receipts and consumption led the Tribunal to conclude that demands were based on presumption and assumptions, which could not be upheld. The Tribunal emphasized the distinction between production and removal, stating that mere unaccounted production does not establish clandestine non-duty paid removal.

Issue 2: Requirement of Catching Actual Clandestine Removal:
The Tribunal highlighted that the burden of proving clandestine removal was not discharged, as there was no material indicating recent unaccounted production or removal found during the visit to the factory. The Tribunal rejected the findings of the Adjudicator, emphasizing the need for corroboration of tainted removals to establish clandestine non-duty paid removal. The Tribunal referred to various court decisions to emphasize the importance of evidence of clandestine removal in cases of unaccounted production.

Issue 3: Evidential Value of Non-Statutory Records:
The Tribunal discussed the reliance on non-statutory records by the revenue to indicate the use of oil in detail, but found that the records did not demonstrate unaccounted production or removal. The Tribunal also noted that the notice for unaccounted production was issued beyond the limitation period for part of the period mentioned. As no unaccounted production or non-duty paid removal was established, the Tribunal set aside the duty demands and penalties imposed by the adjudicator.

In conclusion, the Tribunal dismissed the appeal, stating that the Department failed to prove unaccounted production or non-duty paid removal of PTY, and the period for imposing duty was barred by limitation. The Tribunal found the assessment based on a retracted statement not to be perverse and upheld the dismissal of the appeal.