2010 (7) TMI 357 - AT - Central Excise

Cendestine removal Evidence Clendestine removal of finished goods alleged excess stock of goods found in pemises during search - Department had fixed the annual capacity of the production by the appellants unit and had determined their monthly liability to the tune of Rs. 15 lacs - assessee fails to understand as to how the calculations regarding production of the goods worth Rs. 15,01,18,759/- warranting the duty liability of Rs. 2,96,08,491/- for a period of 51/2 months and that too without any documentary or other cogent materials in support thereto - Not a single piece of clandestinely removed product could be apprehended - No records regarding the electricity consumption were either checked or even perused - The accounts record also could not lend any support to the allegations of any consideration having been received by the appellants from the alleged clandestinely removed goods - records were sought to be relied upon on the basis of the statements of those employees, but in the course of the inquiry it has been clearly established that the statements of those employees were recorded under duress and coercion and the same was not challenged by the Department, neither there was any cross-examination of the deponents on the said issue nor the officers who had recorded the statement of those employees were examined - order cannot be sustained, to be set aside

Issues Involved:
1. Alleged clandestine removal of goods.
2. Validity of evidence and investigation.
3. Capacity of production.
4. Delay in issuing the show cause notice.
5. Imposition of penalty.

Detailed Analysis:

1. Alleged Clandestine Removal of Goods:
The Commissioner confirmed the demand of excise duty amounting to Rs. 2,96,08,491/- with interest and imposed penalties on the directors of the appellant companies. The appellants were accused of suppressing production and clandestinely removing excisable goods without paying the required duty. The appellants contested these allegations, arguing that the order was based on assumptions and lacked cogent evidence. They pointed out the absence of any material or evidence regarding the alleged clandestine removal, including statements from suppliers or purchasers.

2. Validity of Evidence and Investigation:
The appellants argued that the investigation was flawed and the conclusions were based on assumptions and surmises. They highlighted that the statements of employees were recorded under duress and coercion, and there was no corroborative evidence to support the allegations. The Department's case relied heavily on uncorroborated statements and private records, which were not substantiated by any independent material. The investigation did not include verification of transporters, suppliers, or purchasers, nor did it check the electricity consumption records or the capacity of the machinery.

3. Capacity of Production:
The appellants raised the issue of the impossibility of producing the alleged quantity of goods within the given period. The Department's calculations suggested a production far exceeding the capacity determined by the competent authority. The adjudicating authority ignored this defense, which was crucial as it questioned the feasibility of the alleged clandestine production. The Department did not verify the production capacity or check the electricity consumption records, making their claim of huge production and clearance without payment of duty implausible.

4. Delay in Issuing the Show Cause Notice:
The appellants contended that the show cause notice was issued after an inordinate delay of three years from the date of the raid, without any justification for the delay. They argued that this delay barred the claim by limitation. The Tribunal agreed, noting that in the absence of any explanation for the delay, the initiation of proceedings was unfair and deprived the appellants of due process of justice.

5. Imposition of Penalty:
The appellants argued that there was no material to justify the imposition of penalties. The Tribunal found that the Department failed to establish the clandestine removal of goods, and hence, the question of imposing penalties did not arise. The Tribunal referred to various case laws supporting the view that mere failure to declare does not amount to willful misdeclaration or suppression unless there is a positive act of concealment.

Conclusion:
The Tribunal concluded that the impugned order could not be sustained due to the lack of cogent evidence, flawed investigation, and the improbability of the alleged production capacity. The delay in issuing the show cause notice further weakened the Department's case. Consequently, the appeals were allowed, and the impugned order was set aside with consequential relief.

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