2015 (11) TMI 1469 - AT - Central Excise

Duty demand - Discrepancy in stock - Clandestine clearances - reliance on retracted statements - Imposition of penalty - Held that - Respondents were engaged in the manufacture of Man Made Fabrics on job work basis. According to the Revenue the Respondent cleared clandestinely a quantity of 1107428 L.Mtrs. fabrics within 17/18 dates. The entire case was made out on the basis of one chit recovered from the pocket of Excise Supervisor of the Respondent Company. - On perusal of the impugned order it is seen that the Central Excise Supervisor and the Respondent No.2 had retracted the statements. - very next day the Central Excise Officers visited the factory premises and conducted stock verification and no shortage/excess of goods was available from the stocks in the event of clandestine removal of the goods. The entire case was made on the basis of one chit recovered from the pocket of Excise Supervisor. It is noticed that the Excise Supervisor had retracted his statement. In this situation it is difficult to accept the clandestine removal of the goods on the basis of the said chit without any corroborative evidence. The Commissioner (Appeals) has also examined the case in the context of that no statement was recorded of the Dyeing Master or Printing Master. - there was a shortage of goods worth 1 Crore. - No reason to interfere the order of the Commissioner (Appeals) - Decided against Revenue.

Issues Involved:
1. Legitimacy of the demand for duty and penalties based on alleged clandestine removal of goods.
2. Validity of the statements and retraction of statements by the Excise Supervisor and the Director.
3. Adequacy of the evidence (a chit) to establish clandestine removal.
4. Requirement for further investigation and corroborative evidence.

Detailed Analysis:

1. Legitimacy of the demand for duty and penalties based on alleged clandestine removal of goods:
The Revenue appealed against the Commissioner (Appeals) order, which set aside the Adjudication order demanding Rs. 25,47,084.00 in duty and imposing equivalent penalties on the Respondent Company and its Director. The basis for the demand was a chit recovered from the Excise Supervisor, which allegedly detailed clandestine removal of goods between 01.10.2003 and 17.10.2003. The Adjudicating authority confirmed the demand and penalties, but the Commissioner (Appeals) overturned this decision, leading to the present appeal.

2. Validity of the statements and retraction of statements by the Excise Supervisor and the Director:
The Excise Supervisor and the Director initially admitted to the clandestine clearance of goods but later retracted their statements. The Commissioner (Appeals) noted that the statements were retracted within a short period, supported by affidavits and postal acknowledgments. The Revenue argued that the retractions were an after-thought, but the Commissioner (Appeals) found the retractions credible and timely, undermining the initial admissions.

3. Adequacy of the evidence (a chit) to establish clandestine removal:
The entire case was based on a chit recovered from the Excise Supervisor, detailing alleged clandestine removals. The Commissioner (Appeals) and the Tribunal found this evidence insufficient without corroborative evidence. The stock verification conducted the next day found no discrepancies, further weakening the case for clandestine removal. The Commissioner (Appeals) emphasized the lack of corroborative evidence, such as statements from Dyeing Masters or records of raw material suppliers, to support the allegations.

4. Requirement for further investigation and corroborative evidence:
The Tribunal highlighted the need for tangible, concrete, and direct evidence to prove clandestine removal, referencing several judicial precedents. The Commissioner (Appeals) pointed out the lack of investigation into the sources of the figures on the chit, the absence of statements from Dyeing Masters, and the failure to trace the flow of raw materials and finished goods. The Tribunal agreed that the case lacked the necessary corroborative evidence to substantiate the charges.

Conclusion:
The Tribunal upheld the Commissioner (Appeals) decision, rejecting the Revenue's appeals. It concluded that the evidence presented, primarily the chit and the retracted statements, was insufficient to establish clandestine removal of goods. The Tribunal emphasized the need for corroborative evidence and proper investigation, which were lacking in this case. Consequently, the demand for duty and penalties was not justified, and the appeals were dismissed.

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