2019 (10) TMI 1417 - AT - Central Excise

Clandestine production and removal - MS ingots and TMT Bars, flats, challans etc. - reliance placed on third party evidence - other corroborative evidence on record or not - 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 C.C.E. S.T. -RAIPUR VERSUS P.D. INDUSTRIES PVT. LTD. 2015 (11) TMI 455 - CESTAT NEW DELHI . The order confirming the recovery from the Company of appellant and imposition of penalty upon the appellant has no legal basis to sustain - Appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine procurement and clearance of goods, reliance on third-party evidence, imposition of Central Excise duty, penalty on the company and director, appeal against Order-in-Appeal

In this case, the Appellate Tribunal CESTAT New Delhi dealt with the issue of alleged clandestine procurement and clearance of goods by the manufacturers of MS ingots. Central Excise Officers conducted an inspection at the premises of a company and found discrepancies in the stock of raw materials and finished goods. Subsequently, a show cause notice was issued to the manufacturers for the recovery of Central Excise duty, interest, and penalties based on the alleged supply of unaccounted raw materials. The Assistant Commissioner initially dropped the proceedings, but the Commissioner (Appeals) allowed the Department's appeal. The manufacturers appealed to the Tribunal, challenging the reliance on third-party evidence and imposition of penalties.

Upon hearing both sides, the Tribunal considered the evidentiary value of third-party evidence in cases of clandestine removal. Citing relevant case laws, the Tribunal emphasized the need for concrete evidence to prove clandestine activities. It was noted that mere reliance on third-party documents without corroborative evidence is insufficient to establish clandestine activities. The Tribunal highlighted the importance of investigating various aspects like excess production details, raw material purchases, dispatch particulars, sale proceeds realization, and power consumption to prove clandestine activities conclusively.

The Tribunal found that there was no concrete evidence or stock verification linking the manufacturers to the alleged clandestine activities. Emphasizing the requirement for tangible evidence to support allegations of clandestine removal, the Tribunal set aside the order confirming the recovery and penalty on the company and director. The Tribunal concluded that the impugned order had no legal basis to sustain, and therefore, allowed the appeal in favor of the manufacturers.