2019 (8) TMI 1679 - AT - Central Excise

Clandestine removal - MS ingot - MS Roll - MS Plate - corroborative evidences or not - HELD THAT - The allegation in the show cause notice is based on inference and guess work which have no legs to stand. Neither any evidence nor any incriminating documents have been found in the course of investigation from these appellants. Further, there is categorical denial by these appellants of having any business transaction with the said Bhiwadi during the period under dispute. The allegation of Revenue are unsubstantiated and the show cause notice is presumptive, and held is not maintainable - Demand and penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine removal of finished products to another company.

Analysis:
1. The issue in this appeal revolves around whether the appellant company and its Authorized Signatory engaged in clandestine removal of finished products to another company during a specific period. The appellant, involved in manufacturing M.S. Ingots, was alleged to have cleared a significant quantity of finished products to M/s Bhiwadi Rolling Mills Pvt. Limited without payment of duty, resulting in substantial duty evasion.

2. The investigation revealed that incriminating records were found during a search at Bhiwadi Rolling Mills, indicating clandestine activities. The Directors of Bhiwadi admitted to purchasing inputs without invoices and removing finished products clandestinely. The appellant denied any transactions with Bhiwadi since April 2011 and refuted the allegations of selling goods to them. The Revenue relied on the ledger entries of Bhiwadi to link the appellant to the alleged clandestine activities.

3. The Revenue issued a show cause notice demanding the evaded duty amount along with penalties. The adjudicating authority confirmed the demand and imposed penalties on the appellant, its Authorized Signatory, and the Director of Bhiwadi Rolling Mills. The Commissioner (Appeals) upheld the order-in-original, except for setting aside the penalty on the Director of the appellant company.

4. The appellant contended that the allegations were based on assumptions and lacked corroborative evidence. They argued that the Revenue failed to substantiate the claims of clandestine removal, relying solely on inferences from Bhiwadi's records. The appellant emphasized their denial of any transactions with Bhiwadi during the disputed period and highlighted the absence of incriminating documents or evidence linking them to the alleged activities.

5. The appellant cited precedents from the Tribunal where demands based on third-party records were deemed unsustainable without corroborative evidence. The Authorized Representative for the Department supported the impugned order, maintaining the validity of the demand and penalties.

6. After considering the arguments, the Tribunal found the Revenue's allegations to be presumptive and lacking substantial evidence. The Tribunal ruled in favor of the appellant, setting aside the demand and penalties imposed. The Tribunal concluded that the show cause notice was not maintainable due to the unsubstantiated nature of the allegations, thereby allowing the appeals and granting consequential relief to the appellants.