2016 (2) TMI 763 - AT - Central Excise

Imposition of penalties - sustainability of demand of duty on the finished products based on the evidence put-forth by the Revenue in the proceedings before the lower authorities - Held that - In the present case, the corroboration said to have been made is the admission statement of the appellant/assesses. Revenue stopped investigation on recording statement. No further verification or evidence was sought to be recovered for the clandestine manufacture, first of M.S. Ingots and thereafter, from M.S. Ingots to M.S. Angles, etc. and thereafter, their unaccounted clearance to various buyers. No verification was made in the appellant s manufacturing unit or in their records. The admission made by the Director or Partners of the appellant /assesses gives a strong indication of the clandestine activity of the appellant /assessee. However, that by itself cannot be a conclusive evidence especially, as the product on which duty is demanded is M.S. Angles and Channels, etc., which are made from M.S. Ingots, which are in turn made from purported clandestinely received sponge iron. The statements did not provide details of receipts with dates, manufacture or sale to identifiable buyers etc. It is essential to have some piece of corroboration for such a clandestine activity other than the sole evidence of general admission statement of the Director or /partner. The contents of the statement itself was contested and denied later. Thus we find the confirmation of demand and imposition of penalties in these appeals are not sustainable. - Decided in favour of assessee

Summary

Issues:
Six appeals filed against orders of Commissioner (Appeals), Raipur - Imposition of penalties - Identical issues.

Analysis:
The case involved the investigation of non-duty paid clearances of sponge iron by officers of DGCEI, Raipur, leading to demands of central excise duty and penalties against appellants/assessees and individuals. The Commissioner (Appeals) upheld the findings of the Original Authority, prompting the appellants to file appeals. The appellants argued that the case lacked corroborative evidence on transportation, manufacture, and sale of goods, making the demand and penalties legally unsustainable. The Revenue, however, relied on confessional statements by directors of supplier and receiving companies to support their case. The Tribunal examined the evidence put forth by the Revenue and focused on the sustainability of duty demand on finished products based on the investigation. It noted the lack of corroboration for the admission statements made by the directors/partners of the appellants/assessees, emphasizing the importance of corroborative evidence in cases of clandestine activities.

The Tribunal referenced precedents such as the S.M. Steel Ropes case, highlighting the need for corroborative evidence to support admission statements. It cited the Hissar Pipes Pvt. Ltd. case, which emphasized that admission statements are crucial but not conclusive evidence. The Tribunal also referred to the decision in Collector of Customs Vs. D. Bhoormul, stressing the requirement for sufficient evidence to raise a presumption in favor of the fact sought to be proved. In this case, the Tribunal found that the investigation primarily relied on admission statements without further verification or corroboration regarding the alleged clandestine activities. The lack of detailed evidence on receipts, manufacture, and sales, coupled with the denial of the statement contents later, weakened the Revenue's case. Consequently, the Tribunal concluded that the confirmation of demand and imposition of penalties were not sustainable, leading to the allowance of the appeals.

Overall, the judgment underscores the importance of corroborative evidence in cases involving admission statements and clandestine activities, highlighting the need for thorough investigation and verification to support duty demands and penalties effectively.