2023 (8) TMI 1413 - AT - Central Excise

Clandestine removal - allegation on the basis of a third-party evidence in the form of Dharamkanta slips at the end of the supplier and the statement of Shri Ashok Agarwal, in charge of the supplying firms - HELD THAT - The appellants have not accepted the contention of the Department and the statement of Shri Agarwal; no opportunity to cross-examine the said Shri Agarwal has been accorded. Moreover, the allegation is sought to be sustained on the basis of alleged suppressed receipts of one of the raw materials i.e. Formaldehyde. No investigation, whatsoever, concerning the use of the primary raw material, i.e. wood logs etc., electricity, labour, etc. has neither been investigated nor established. The aspect of transportation of the raw materials and the final products has not been looked into. As consistently held by the Courts and the Tribunals, allegation of clandestine removal is a serious charge; the same needs to be established the receipt of raw material, manufacture of excisable goods by deploying labour and by using electricity, transport of excisable goods to the buyers and financial transactions thereof. None of the elements have been proved even on a sample basis, leave alone in a mathematical precision. Such a halfbaked investigation cannot form basis of establishing the charge of clandestine removal. A few cases have travelled up to this Bench which has set aside the impugned orders. It is bewildering to see such a sorry state of affairs where identical show-cause notices are issued on the same set of evidences and some are dropped and some are upheld by the adjudicating authority. Appeal allowed.

Summary

Issues involved:
The case involves the alleged clearance of excisable goods without payment of duty based on investigation by DGCEI, show-cause notices issued to various manufacturers of plywood, and the confirmation of cases against certain manufacturers.

Details of the Judgment:

Issue 1: Allegation of clandestine removal

The appellants challenged the impugned order confirming the allegation of clandestine removal against them. The Department relied on third-party evidence such as Dharamkanta slips and the statement of Shri Ashok Agarwal. However, the appellants disputed this evidence and were not given an opportunity to cross-examine Shri Agarwal. The investigation did not establish the use of primary raw materials, labor, electricity, or transportation of raw materials and final products. The Tribunal emphasized that clandestine removal charges require proof of various elements like receipt of raw material, manufacturing process, transportation, and financial transactions. The lack of thorough investigation and evidence led the Tribunal to set aside the impugned order.

Issue 2: Inconsistencies in handling similar cases

The Tribunal noted inconsistencies in handling cases where identical show-cause notices were issued based on the same evidence. Some cases were dropped due to insufficient evidence, while others were confirmed. The Tribunal found it perplexing that the Department accepted orders dropping proceedings after they were challenged. This inconsistency raised doubts about the merit and factual basis of the impugned order. Consequently, the Tribunal allowed the appeal, emphasizing the need for a robust investigation and evidence to support allegations of clandestine removal.

The appeal was allowed on 30/08/2023 by the Appellate Tribunal CESTAT CHANDIGARH, highlighting the importance of thorough investigation and evidence in cases involving allegations of clandestine removal.