2011 (8) TMI 732 - HC - Central Excise

Clandestine removal - Search and seizure - Demand - The registration was surrendered and the firm started availing SSI exemption vide notification dated 1.3.1997 - Shri Rakesh Kumar Pandey, the Manager of the firm, gave statement giving details of the manner, in which the goods were removed in the years 1994-95 to 1997-97 - Tribunal committed serious mistake in recording the findings that since no shortage of raw material or finished goods were found in the factory premises at the time of raid, the entries in the diaries pertained to the clearance of the disputed goods by the firm - Tribunal did not doubt the statement of Shri Rakesh Kumar Pandey, the Manager of the appellant firm regarding alleged production and clearance of the goods in a clandestine manner, but did not accept the admission of the Manager on the ground that he was not allowed to be cross examined by the appellant, without caring to look into the record that he was the employee of the firm and whether any request was made to cross examine him - Tribunal concluded that Mukul N. Shah was working as Commission Agent for M/s. Shah Brock India and accepted the plea advanced by him that the entries made in the diaries related to the sale of acid slurry on commission basis, on behalf of M/s. Shah Brock India - Decided in favor of revenue

Summary

Issues Involved:
1. Legality and propriety of the Tribunal's order regarding uncontroverted documentary evidence.
2. Requirement for the Department to prove guilt beyond doubt in cases of admitted clandestine removal.

Issue-wise Detailed Analysis:

1. Legality and Propriety of the Tribunal's Order:
The court examined whether the Tribunal's order was proper and legal when substantial documentary evidence remained uncontroverted. The Tribunal had set aside the duty and penalty imposed by the Commissioner on the grounds that the entries in the diaries were vague and lacked detailed descriptions of the goods. The Tribunal also found no evidence of discrepancies in the statutory records or proof of extra raw material receipt and consumption, nor any shortage of raw material or excess finished goods at the time of the raid.

However, the Commissioner had found that the private diaries recovered from the residence of a partner of the firm contained entries in his handwriting, which he admitted pertained to the clandestine removal of goods. The Commissioner also noted that the parallel invoices, although not recovered from the firm's premises, were authenticated by the partner and used for removing goods without payment of duty. The court highlighted that the Tribunal did not refer to these detailed findings and the corroborative statements of the firm's manager and partner, which clearly established the clandestine removal of excisable goods.

2. Requirement to Prove Guilt Beyond Doubt:
The court addressed whether the Department needed to prove guilt beyond doubt in cases where clandestine removal was admitted by a partner and supported by corroborative evidence. The Tribunal had relied on previous decisions, stating that entries in seized notebooks were not conclusive evidence of clandestine removal unless corroborated by other evidence like raw material purchase or goods removal through transporters.

The court referred to the Supreme Court's decision in *Collector of Customs, Madras vs. D. Bhoor Mall*, which held that the Department is not required to prove its case with mathematical precision. It only needs to establish a degree of probability that a prudent person would believe in the existence of the fact in issue. The court found that the Commissioner had corroborated the diary entries with statutory records and the partner's admissions, thus fulfilling the requirement of proof.

Conclusion:
The court concluded that the Tribunal had committed a serious mistake by not referring to the detailed findings and corroborative evidence presented by the Commissioner. The Tribunal's reliance on the lack of detailed descriptions in the diaries and the absence of raw material discrepancies was insufficient to dismiss the clandestine removal allegations. The court answered both questions in favor of the Revenue and against the assessee, setting aside the Tribunal's order and directing it to decide the appeals afresh in conformity with the court's findings.