2019 (10) TMI 1296 - AT - Central Excise

Clandestine Removal - MS ingots and TMT Bars, flats, challans etc. - case of appellant is that the Department has raised a wrong recovery relying upon a third party evidence i.e. documents recovered from M/s. PIL - HELD THAT - There is no other evidence or document in the form of stock verification of the raw-material of the appellant and the material supplied to M/s. PIL nor any evidence about usage of any transportation by the appellants for transporting the alleged quantity of raw-material to M/s.PIL. In absence thereof the documents recovered from M/s.PIL cannot be held against the appellant. It is well settled law that there has to be some concrete evidence which would show clandestine manufacture of goods, as was reiterated by Tribunal, Delhi in the case of Commissioner of Central Excise Service Tax, Raipur vs. P.D. Industries Pvt. Ltd. 2015 (11) TMI 455 - CESTAT NEW DELHI . The order confirming the recovery has no legal basis to sustain - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Alleged clandestine removal of goods, reliance on third party evidence, recovery of Central Excise duty, appeal against Order-in-Appeal.

Analysis:
The judgment involves the manufacturers of MS ingots facing allegations of clandestine procurement and clearance of goods. Central Excise Officers discovered shortages in raw material and finished goods at the premises of another company, leading to investigations and recovery of incriminating documents. Statements were recorded, and a show cause notice was issued proposing the recovery of Central Excise duty from the manufacturers. The Assistant Commissioner initially dropped the proceedings, but the Commissioner (Appeals) allowed the appeals filed by the Department, resulting in an appeal before the Tribunal by the manufacturers.

The manufacturers argued that the recovery was based on third party evidence without any direct evidence against them. They cited case laws to support their position. On the other hand, the Department contended that investigations and searches at the other company's premises yielded incriminating evidence implicating the manufacturers in supplying unaccounted raw material. The Tribunal considered both sides' arguments.

The Tribunal examined the evidentiary value of third party evidence in cases of clandestine removal, referencing established legal precedents. It emphasized the need for concrete evidence to prove clandestine activities, including excess production details, raw material purchases, transportation records, sale proceeds realization, and power consumption. The Tribunal found the lack of such evidence against the manufacturers, leading to the setting aside of the recovery order. The judgment highlighted the seriousness of clandestine removal allegations and the necessity for tangible evidence to support such claims.

In conclusion, the Tribunal ruled in favor of the manufacturers, setting aside the recovery order due to the lack of legal basis to sustain the allegations. The appeals were allowed, emphasizing the importance of thorough investigations and corroborative evidence in cases involving clandestine activities to uphold legal proceedings.