2013 (9) TMI 414 - AT - Central Excise

Clandestine Removal of Goods Failure to Bring Evidences - The challenge to the orders essentially related to absence of cogent evidence in support of the charge against the appellants relating to clandestine removal of the goods, failure on the part of the Department to adduce satisfactory evidence in support of such charge and the findings having been arrived at by the authority in the absence of evidence in support - Held that - The Revenue failed to substantiate the findings recorded in the impugned Order regarding production capacity, to persuade to reject the contention of the appellant that there was failure on the part of respondent to collect any evidence in relation to either procurement of raw materials by the appellant or production of huge quantity of final goods alleged as removed clandestinely to sustain the charge of clandestine removal - Once unaccounted production was not established, even otherwise there can be no clandestine removal thereof - Unaccounted removals have in any case not been established on the basis of the evidence available on record. What is the relevancy of the documents seized in the course of the panchnama in the case in hand. In that regard, it would be necessary to ascertain as to what were the documents those were seized by the investigation machinery, what is the relevancy of those documents to bring home the charge against the appellants and to what extent - can it be said that any credibility can be given to the so-called documentary evidence sought to be relied upon to support the charge of clandestine removal of the goods by the appellants - Neither the panchnama satisfies the minimum requirement of rules of procedure nor any credibility can be given to the materials allegedly seized in the course of such panchnama nor to the documents sought to be relied upon in the matter. The appellants were justified in making grievance of prejudice having been suffered by them on account of uncorroborative documentary evidence relied upon by the department. Ganga Rubber Industries vs. CCE 1986 (6) TMI 214 - CEGAT, NEW DELHI - it was for the Department to establish that the entries in books recovered in the course of investigation were genuine and the fact that such verification was done had to be established by the Department - In the absence of proof about entries in the books to be representing actual clandestine removal, it cannot be said that the Revenue has discharged its burden. Sai Chemicals Pvt. Ltd. Vs. CCE 2010 (4) TMI 446 - CESTAT, NEW DELHI - the demand cannot be sustained without any tangible evidence, based only on inferences involving unwarranted assumptions - In the entire records of proceedings, there was no evidence to indicate that there was clandestine manufacturing - There was no independent tangible evidence on record of any clandestine purchases or receipt of the raw materials required for the manufacturing of the alleged quantity of finished goods for its clandestine removal from the factory - In the entire notice and the order there was no satisfactory and reliable independent evidence as regarded the unaccounted manufacture and or receipt of the huge quantities of raw materials - The quantities of the bags dispatched from the factory would require some transportation arrangement for delivery from the factory - any reliable evidence about any vehicle coming to or going out of the factory without proper entries was not forthcoming - There was also no cogent evidence about any freight payment for any such movement. Tangible evidence of removal from factory of unaccounted goods so manufactured, by loading from factory and transportation therefrom, of alleged clandestinely removed goods there was no reliable evidence of the actual customer/recipient of the clandestinely removed goods with their confirmation of unauthorized payment towards unaccounted purchase of goods allegedly manufactured and removed in a clandestine manner from the factory of the appellant - There was no recovery of any unaccounted sales proceeds in substantial cash in the factory or office premises or anywhere else in the control of the appellant-company, backed by any confirmation oral or written from the person giving such cash against goods removed in clandestine manner without payment of duty from the factory of appellant-company - Decided in favour of Assessee.

Issues Involved:

1. Allegations of clandestine removal of goods and evasion of duty.
2. Reliability and credibility of evidence, including statements and documents.
3. Procedural compliance during search and seizure operations.
4. Burden of proof and standard of evidence required to establish clandestine removal.
5. Retraction of statements and their evidentiary value.
6. Corroboration of documentary evidence with other tangible evidence.
7. Legal principles and precedents applicable to the case.

Issue-wise Detailed Analysis:

1. Allegations of Clandestine Removal of Goods and Evasion of Duty:

The case involved allegations against KTPPL and KI of engaging in clandestine removal of goods and evasion of duty. The investigating agency conducted searches at various premises and seized materials, including excess stock, cash, duplicate note books, kacha challans, hisaba books, and other documents. The Commissioner based the charge of clandestine removal on the capacity of machines, electricity consumption, labor employed, and raw materials consumed. The findings were primarily based on statements of deponents and documents recovered during the investigation.

2. Reliability and Credibility of Evidence, Including Statements and Documents:

The reliability and credibility of the evidence, particularly the statements and documents, were challenged. The Commissioner heavily relied on kacha challans, hisaba books, and loose sheets seized during the search. The appellants contended that the seizure proceedings were illegal, the author of the documents was not identified, and the documents were merely duplicate copies. The Tribunal emphasized that the charge of clandestine removal is serious and must be established with cogent evidence. The burden of proof lies on the department to prove the charge with concrete and tangible evidence.

3. Procedural Compliance During Search and Seizure Operations:

The procedural compliance during the search and seizure operations was scrutinized. The panchnama did not describe the premises or the location of the documents, and there were no details about the keys or the time of the search. The Tribunal noted that proper care must be taken to ensure the authenticity of the seizure and the seized materials. The absence of such precautions raised doubts about the credibility of the proceedings.

4. Burden of Proof and Standard of Evidence Required to Establish Clandestine Removal:

The Tribunal highlighted that the burden of proving the charge of clandestine removal lies on the department. The charge cannot be established on assumptions and presumptions but must be based on concrete and tangible evidence. The Tribunal referred to various judgments, including Durga Trading Company vs. CCE, Lucknow, and Oudh Sugar Mills Ltd. vs. UOI, which emphasized the need for concrete evidence to establish such charges.

5. Retraction of Statements and Their Evidentiary Value:

The retraction of statements by the appellants was a significant issue. The Tribunal noted that retracted statements must be scrutinized to determine their voluntariness and truthfulness. The Commissioner rejected the retraction on the ground of delay, but the Tribunal emphasized that the burden lies on the department to prove that the statements were voluntary and not obtained under duress or coercion.

6. Corroboration of Documentary Evidence with Other Tangible Evidence:

The Tribunal emphasized the need for corroboration of documentary evidence with other tangible evidence. The kacha challans, hisaba books, and loose sheets must be corroborated with evidence of procurement of raw materials, production capacity, labor employed, and actual sales. The Tribunal found that the department failed to establish the link between the documents and the activities of the appellants in their factory.

7. Legal Principles and Precedents Applicable to the Case:

The Tribunal referred to various legal principles and precedents, including the need for concrete evidence to establish charges of clandestine removal, the burden of proof on the department, and the standard of evidence required. The Tribunal also emphasized the importance of procedural compliance during search and seizure operations and the need for corroboration of documentary evidence with other tangible evidence.

Conclusion:

The Tribunal allowed the appeals, setting aside the impugned orders and providing consequential relief to the appellants. The Tribunal emphasized the need for concrete and tangible evidence to establish charges of clandestine removal and highlighted the importance of procedural compliance and corroboration of evidence. The Tribunal's decision was based on a thorough analysis of the evidence, legal principles, and precedents applicable to the case.

← Previous Next →