2007 (11) TMI 49 - AT - Central Excise

No duty can be demanded on basis of probability of clandestine removal Dept. is needed to prove actual clearance with mathematical precision But appeal by dept. cannot be held non-maintainable on the ground that appeal against co-notice is absent

Summary

Issues:
1. Demand of duty on 'cone yarn' allegedly cleared clandestinely.
2. Imposition of penalties under Section 11AC.
3. Maintainability of Revenue's appeal against dropping of demand.
4. Evidence supporting the demand of duty.
5. Legal basis for raising duty demand on the basis of probability.

Analysis:

1. The case involved a show-cause notice invoking the proviso to Section 11A(1) of the Central Excise Act, demanding duty on 'cone yarn' cleared clandestinely. The Commissioner confirmed a partial duty demand of Rs. 55,387/- against the respondents, dropping the rest due to lack of evidence. The Revenue appealed against the dropped demand, contesting the Commissioner's decision.

2. Penalties under Section 11AC were imposed equal to the amount of duty demanded. The appeal primarily focused on contesting the dropping of a major part of the duty demand on the respondents. The issue of penalties was intertwined with the demand of duty and the evidentiary support for the same.

3. The respondents filed an application to reject the Revenue's appeal, arguing it was not maintainable due to the absence of a challenge to the Commissioner's order concerning co-noticees. The Tribunal dismissed this application, stating that the appeal's maintainability was not contingent on challenges against co-noticees, especially when no duty demand was upheld against them.

4. The appeal hinged on the evidence supporting the duty demand, including recovered invoices, despatch register, statements from the respondents' accountant and Managing Director, and statements from traders/buyers and transporters. The Revenue's case relied on these documents to establish the probability of clandestine removal of cone yarn by the respondents.

5. The Tribunal analyzed the legal basis for raising duty demand based on probability, citing precedents like the Supreme Court and High Court judgments. However, it found the evidence presented insufficient to establish the high degree of probability required for duty demand. The Tribunal emphasized the necessity of quantitative evidence with mathematical precision for duty demands, which was lacking in the present case, leading to the dismissal of the appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal due to the lack of concrete evidence supporting the duty demand based on probability alone, highlighting the importance of quantitative evidence for such claims.