2016 (2) TMI 761 - AT - Central Excise

Demand of excise duty on unaccounted clandestine removal of re-rolled products of iron/steel - recovery of certain documents at the raw material supplier s end and statement of the Director of the appellant - Held that - No other verification including the verification at the appellant s premises has been made during the investigation. There is absolutely no corroboration relating to transportation of unaccounted sponge iron payment of amount manufacture of MS Ingots out of sponge iron and further manufacture of re-rolled products using such ingots clearance of re-rolled products details of transport or buyers of such unaccounted final product. Though it is not feasible to have evidences on all the above aspects it is certainly required to have at least a few corroborative evidence to assert clandestine receipt of raw material manufacture and clandestine removal of dutiable final products. In the present case such evidences are completely lacking. It is relevant to note that the learned Commissioner (Appeals) set aside the penalty imposed on Shri Drolia on the ground that he has joined the company as Director on 01/7/2008 and as such was not involved in the clandestine removal that happened during November 2007 to April 2008. There is element of contradiction here to the extent that while admitting that Shri Drolia was not with the company as Director during the impugned period his statement to support the clandestine clearance during that period was relied upon. Even the purported admission in this statement is not based on any material evidence like private records payment details etc. Thus the whole case of clandestine manufacture and clearance is without sound basis of corroborative admissible evidences. - Decided in favour of assessee

Summary

Issues:
- Allegation of non-payment of Central Excise duty on re-rolled products
- Alleged clandestine clearance of products without valid documents
- Confirmation of demand and penalty imposition
- Appeal against the penalty on the Director of the appellant company

Analysis:
1. Allegation of non-payment of Central Excise duty on re-rolled products:
The case involved the appellant, engaged in manufacturing various products liable to Central Excise duty, being accused of non-payment of duty on re-rolled products. The Revenue alleged that another company, M/s Shri Sita Ispat and Power Pvt. Ltd., had cleared Sponge Iron without valid documents, issuing parallel invoices to the appellant. The proceedings were initiated based on this allegation, leading to the adjudication order confirming a demand and imposing penalties.

2. Alleged clandestine clearance of products without valid documents:
The appellant argued that the entire case against them was based on presumptions without concrete evidence. The Revenue's case relied on recovery of certain invoices and a statement from the Director of the appellant, alleging clandestine manufacture and clearance of products. However, the appellant contended that there was no evidence supporting these claims, such as details of transport, payment, actual manufacturing process, or buyers of the final products.

3. Confirmation of demand and penalty imposition:
Upon appeal, the Commissioner (Appeals) upheld the findings of the Original Authority regarding the demand and penalty, except for the penalty imposed on the Director of the appellant. The appellant challenged this decision, arguing that the case lacked substantial evidence to prove the alleged clandestine activities, especially considering the absence of corroborative evidence and contradictions in the reliance on the Director's statement.

4. Appeal against the penalty on the Director of the appellant company:
The appellant emphasized that the Director, who joined the company after the period in question, was not involved in the alleged clandestine activities. Despite this, the statement provided by the Director was used as evidence, raising concerns about its validity and the lack of supporting material evidence. Ultimately, the Tribunal found that the case lacked a solid basis with insufficient corroborative evidence to support the allegations of clandestine manufacture and clearance. As a result, the impugned order was set aside, and the appeal was allowed.