2011 (10) TMI 255 - AT - Central Excise

Demand - Held - Without locating a single buyer and any investigation, merely on the basis of statements and chits recovered, duty cannot be demanded.

Summary

Issues:
Verification of stock and records leading to shortage of MS Ingots, excess production, duty demand, interest, and penalty imposition based on chits recovered from the manager and statements of Managing Director.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Ahmedabad, involved a case where a shortage of 328.575 MT of MS Ingots and 30 MT excess production were discovered during the verification of stock and records at the appellant's factory. The Revenue based its case on chits recovered from the possession of the Manager, which were claimed to represent daily production in August 2006. The appellant argued that the chits did not accurately reflect actual production, pointing out discrepancies in production entries on non-working days and lack of corroborating evidence for clandestine removal beyond the chits and statements of the Manager and Managing Director. The Managing Director's retracted statement and absence of questions regarding buyers or raw material shortages during the investigation were highlighted. The appellant cited legal precedents where duty demands based solely on chits or private records without additional evidence were not upheld by the courts and tribunals.

The Tribunal considered the submissions from both sides and noted that the Revenue's case relied heavily on the chits recovered from the Manager, with no other substantial evidence presented. The absence of inquiries regarding buyers, raw material shortages, or other discrepancies during the investigation raised doubts about the validity of the duty demand. Legal precedents were referenced to emphasize that duty demands cannot be solely based on statements and chits without further investigation or confirmation of clandestine activities. The Tribunal highlighted previous cases where duty demands were not sustained due to insufficient evidence beyond chits or private records. Ultimately, the Tribunal concluded that the impugned order could not be upheld, leading to the allowance of both appeals with consequential relief granted to the appellants.

In conclusion, the judgment emphasized the importance of thorough investigations and corroborating evidence in cases involving duty demands based on recovered chits or private records. The decision underscored the necessity of establishing a clear link between the evidence presented and the alleged clandestine activities to support duty demands effectively. The legal precedents cited served as a basis for the Tribunal's decision to allow the appeals and provide relief to the appellants based on the lack of substantial evidence beyond the chits and statements in the case at hand.