2012 (6) TMI 100 - AT - Central Excise

Clandestine removal of goods - search - demand imposed on basis of documents which came to the possession of Revenue from uninformed and undisclosed sources - Held that - Fact of recovery of the documents is very important and the silence on the part of the Revenue to disclose the source of acquisition and possession of the same is fatal to the Revenue s case especially when the same do not stands corroborated in material particular. Charges of clandestine removal are quasi criminal and requires production of positive and tangible evidences. Even the examination of the said documents have led us to conclude that they are fabricated documents and which at the most can raise doubt against the appellants but cannot fasten duty liability on the same. We note that the investigation in the present case do not lead to the logical end and do not result in the alleged clandestine activities on the part of the appellants. Apart from the loading slips which we have already held as not carrying much evidentiary value, there is virtually no evidence on record to establish clandestine activities of the appellants. In fact, Commissioner has himself observed that the demand is being confirmed on the basis of circumstantial evidence. Therefore, said duty confirmation cannot be upheld - Decided in favor of assessee.

Issues Involved:
1. Clandestine removal of goods.
2. Evidentiary value of sourced documents.
3. Corroboration of sourced documents with other evidence.
4. Procedural lapses in investigation.
5. Standard of proof in quasi-criminal proceedings.
6. Reliance on expert opinions.
7. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Clandestine Removal of Goods:
The primary issue was whether the appellants were involved in the clandestine removal of goods. The Revenue's case was based on sourced documents, including 719 loading slips, which allegedly indicated large-scale suppression of receipts of raw materials and clandestine manufacture and clearance of final products. The Tribunal found that the sourced documents were provided by an informer, a disgruntled former employee of the appellant, and lacked credibility. The Tribunal emphasized that the presumption under Section 36A of the Central Excise Act was not available as the documents were not seized from the appellants' custody or control.

2. Evidentiary Value of Sourced Documents:
The Tribunal scrutinized the sourced documents, noting that the credibility of these documents was doubtful. The Tribunal highlighted that the Revenue failed to disclose the source of acquisition of these documents, which were allegedly fabricated by the informer. The Tribunal emphasized that the presumption under Section 36A was not applicable, and the burden of proof lay heavily on the Revenue to establish the genuineness and relevance of these documents.

3. Corroboration of Sourced Documents with Other Evidence:
The Tribunal found that the sourced documents were not corroborated by any independent evidence. The Tribunal noted discrepancies in the investigation, such as the failure to confront key witnesses with the sourced documents and the lack of evidence showing the procurement of other raw materials necessary for manufacturing the alleged quantity of final products. The Tribunal emphasized that the corroborative evidence provided by the Revenue was insufficient to substantiate the allegations of clandestine removal.

4. Procedural Lapses in Investigation:
The Tribunal identified several procedural lapses in the investigation. The Tribunal noted that the Revenue did not follow proper procedures in seizing and handling the documents, which raised doubts about their authenticity. The Tribunal also pointed out that key witnesses, such as the labour contractor and drivers, were not adequately questioned or confronted with the sourced documents. The Tribunal criticized the Revenue for not recording the statement of the informer, who was a crucial figure in the case.

5. Standard of Proof in Quasi-Criminal Proceedings:
The Tribunal emphasized that the proceedings under the Central Excise Act are quasi-criminal in nature, requiring a higher standard of proof. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Vinod Solanki, to highlight that the charges of clandestine removal must be proved beyond reasonable doubt. The Tribunal held that the Revenue failed to meet this standard of proof, as the evidence presented was insufficient and lacked credibility.

6. Reliance on Expert Opinions:
The Tribunal discussed the conflicting expert opinions on the sourced documents. The Revenue relied on the opinion of the Government Examiner of Questioned Documents (GEQD), while the appellants produced an opinion from a private handwriting expert. The Tribunal noted that the credibility of the private expert was challenged by the Revenue. However, the Tribunal emphasized that the matching of signatures alone was not sufficient to establish the authenticity of the documents, especially when there were allegations of fabrication.

7. Imposition of Penalties:
The Tribunal set aside the penalties imposed on the appellants, including M/s Kothari Products Ltd. and other individuals. The Tribunal held that the confirmation of demand and imposition of penalties were unjustified due to the lack of credible evidence and procedural lapses in the investigation. The Tribunal emphasized that the charges of clandestine removal were not substantiated by sufficient and tangible evidence, and the penalties could not be upheld.

Conclusion:
The Tribunal allowed all the appeals and set aside the impugned order, emphasizing the lack of credible evidence, procedural lapses, and the higher standard of proof required in quasi-criminal proceedings. The Tribunal held that the sourced documents, which formed the basis of the Revenue's case, were not reliable and lacked corroboration, leading to the conclusion that the charges of clandestine removal could not be sustained.

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