2014 (5) TMI 1116 - AT - Central Excise

Demand - clandestine removal of final product - recovery of commercial invoices in respect of duty paid goods which were rejected by their customer and were kept outside the factory and were diverted from their only - Held that - it is found that having recovered commercial invoices, the Revenue did not make further investigation as regards the identity of the buyers and the transporter etc. so as to corroborate the charge of clandestine removal. No efforts were made to find out the source of the raw material and no statements of the production people were recorded. It is well settled law that charges of clandestine removal cannot be upheld on the basis of non-corroborative evidences. Inasmuch as in the present case there is neither any corroboration to the charge of clandestine removal under the cover of commercial invoices nor any independent evidence produced on record. Further, as the plea of the appellant as regards raising of commercial invoices stands accepted in respect of some of the returned goods, I am of the view that the charges of clandestine removal cannot be upheld against the appellant. - Decided in favour of appellant with consequential relief

Summary

Issues: Clandestine removal of goods, duty demand based on commercial invoices, validity of investigation procedures.

Analysis:
1. Clandestine Removal of Goods: The case involved allegations of clandestine removal of final products by the appellant, based on the recovery of commercial invoices during a search of the factory. The Commissioner (Appeals) had initially confirmed a demand for duty payment, but later allowed a benefit for duty involved in returned goods. The Tribunal noted the appellant's claim that the commercial invoices were for goods cleared and returned by customers, not brought back to the factory but cleared from dealer or transporter premises. The Tribunal found that the Revenue failed to investigate the identity of buyers or transporters, lacking corroborative evidence for the charge of clandestine removal.

2. Duty Demand Based on Commercial Invoices: The Revenue had issued a Show Cause Notice proposing a significant duty demand against the appellant, based on discrepancies in raw material and recovery of commercial invoices not maintained under the prescribed rule. The Commissioner (Appeals) partially upheld the demand but allowed a benefit for duty on returned goods. The Tribunal observed that the earlier order of the Commissioner (Appeals) extending such benefit was not challenged by the Revenue, supporting the appellant's contention that the commercial invoices were for goods already cleared and returned by customers.

3. Validity of Investigation Procedures: The Tribunal criticized the Revenue for not conducting a thorough investigation into the allegations of clandestine removal. It noted the lack of efforts to verify the source of raw material, record statements of production staff, or corroborate the charge with independent evidence. Emphasizing that charges of clandestine removal require corroborative evidence, the Tribunal found the absence of such evidence and accepted the appellant's explanation regarding the commercial invoices issued for returned goods. Consequently, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief to the appellant.