2014 (5) TMI 869 - HC - Central Excise

Clandestine removal of goods - Onus to prove - Held that - onus was on the Department to prove that there was clandestine removal of the fabrics by the assessee. Investigating agency appears not to have examined twelve buyers whose names have been revealed in the confessional statements of all the three individuals, which later on have been retracted. It appears that the show cause notice, which was issued after nearly six months, and therefore, there was sufficient time available with the investigating agency. However, in absence of any corroboration, if both the authorities have chosen not to uphold the action of the Revenue, no perversity could be seen in the findings of both of them - Decided against Revenue.

Summary

Issues involved:
1. Retraction of statements recorded under Section 14 of the Central Excise Act, 1944
2. Validity of document being affidavit retracting statements
3. Rejection of evidence in the form of loose slips showing illicit removal of goods
4. Investigation into goods sold to fictitious bodies
5. Allegation of personal vendetta against the assessee
6. Setting aside the demand under Section 11A of the Central Excise Act, 1944
7. Dismissal of penalty imposed on the assessee under Section 11AC and interest under Section 11AB
8. Validity of the seizure of goods under Rule 25 of the Central Excise Rules, 2002
9. Dismissal of penal provisions imposed on employees, director, and broker under Rule 26 of the Central Excise Rules, 2002

Analysis:
1. The first issue raised was whether the retraction of statements recorded under Section 14 of the Central Excise Act, 1944 was legal, proper, and valid. The Court considered the method of sending the affidavit retracting the statements and noted that it was sent by UPC and not registered post. The Court examined the facts and concluded that the onus was on the Department to prove clandestine removal of fabrics by the assessee. The investigating agency did not examine the buyers mentioned in the confessional statements, which were later retracted. Both the Commissioner [Appeals] and the Tribunal found no corroborative evidence, leading to the dismissal of the Tax Appeal.

2. The second issue addressed the validity of the document being an affidavit retracting statements not submitted to the adjudicating authorities. The Court observed that there was a lack of evidence to prove the charges of clandestine removal. The Commissioner [Appeals] concluded that the Department failed to establish a case of duty evasion, even on the principle of preponderance of probability. The Tribunal concurred with this finding, stating that no case was made out due to the absence of corroborative evidence.

3. The third issue involved the rejection of evidence in the form of loose slips showing illicit removal of goods. The investigating officer found loose papers indicating unaccounted grey and cotton fabrics. However, the Commissioner [Appeals] and the Tribunal did not find sufficient evidence to prove the charges of clandestine removal, leading to the dismissal of the Tax Appeal.

4. The fourth issue questioned the investigation into goods sold to fictitious bodies. The Tribunal noted a lack of evidence and personal vendetta amongst the officers of the Department. It was observed that the investigating agency did not collect evidence after recording confessional statements, and no case was made out due to the absence of corroborative evidence.

5. The fifth issue raised concerns about personal vendetta against the assessee. Both the Commissioner [Appeals] and the Tribunal concluded in favor of the respondent-assessee, stating that the Department failed to prove clandestine removal of fabrics. The authorities found no perversity in their findings and dismissed the Tax Appeal.

6. The sixth issue involved setting aside the demand under Section 11A of the Central Excise Act, 1944. The Commissioner [Appeals] and the Tribunal did not find sufficient evidence to uphold the action of the Revenue, leading to the dismissal of the Tax Appeal.

7. The seventh issue addressed the dismissal of penalty imposed on the assessee under Section 11AC and interest under Section 11AB. The authorities found no clear intention to evade payment of duty, resulting in the dismissal of the Tax Appeal.

8. The eighth issue questioned the validity of the seizure of goods under Rule 25 of the Central Excise Rules, 2002. The Court noted that the goods seized were not entered in records, leading to the dismissal of the Tax Appeal.

9. The ninth issue involved the dismissal of penal provisions imposed on employees, director, and broker under Rule 26 of the Central Excise Rules, 2002. The Court found no evidence to support the charges of duty evasion, resulting in the dismissal of the Tax Appeal.