2016 (5) TMI 656 - AT - Central Excise

Clandestine manufacture and clearances - Demand of excise duty - pertaining to documents recovered from the residential premises - Held that - there is no confessional statement recorded during investigation that Appellants have indulged in any clandestine manufacture and clearance of goods based on documents recovered from the residential premises of Shri Sanatan Maity. There is also no evidence on record as to from where the raw materials for manufacturing of M.S. Ingots and Re-rollable products manufactured by appellants were procured. Alternately there is also weight in the argument of the Appellants that M.S.Ingots alleged to be clandestinely cleared by Aappellant No.2 are not sufficient to manufacture quantities alleged to have been manufactured and cleared by Appellant No.1. Current proceedings only convey a strong suspicion against the appellants that they are undertaking clandestine manufacture and clearance of dutiable goods. As already observed by the Courts any suspicion, however grave, can not take the place of an evidence. In the present proceeding certain documents recovered from the residence of Shri Sanatan Maity etc. are the only indicators to raise suspicion that certain goods might have been manufactured and cleared by the Appellants. In the case of Pan Parag India Ltd. vs. Commissioner of Central Excise, Kanpur (supra), relied upon by the Appellants, also there were 719 loading slips indicating clandestine clearance by that Appellant. Therefore, the appeals filed by Appellant No.1 and 2 are rejected with respect to demands of ₹ 28,53,835/- and ₹ 98,291/- , which shall be payable with interest and equivalent penalty. As no option to pay 25% of reduced penalty under sec. 11 AC has been extended in the Orders-in-Original, therefore, the same is extended to the Appellants if these amounts, alongwith interest and reduced penalty, stand paid within one month of the receipt of this order. In the interest of justice penalty upon Shri Ajay Bansal, Director of Appellant No.2 is reduced to ₹ 30,000/-. Also in view of Bombay High Court s Order in the case of CC(E.P.) vs. Jupiter Exports 2007 (6) TMI 2 - HIGH COURT, BOMBAY , penalties imposed upon partner Shri Ajay Bansal and Shri Rajendra Agarwal are not imposable and are accordingly set aside. - Appeal disposed of

Summary

Issues Involved:
1. Allegations of clandestine manufacture and clearance of goods.
2. Admissibility and reliability of documents recovered from a third party’s premises.
3. Corroboration of evidence for clandestine removal.
4. Liability of penalties on individuals associated with the appellant companies.

Issue-wise Detailed Analysis:

1. Allegations of Clandestine Manufacture and Clearance:
The case revolves around allegations that Appellant No.1 (M/s. Shivam Steel Corporation) and Appellant No.2 (M/s. Bajrang Steel & Alloys Pvt. Ltd.) were involved in the clandestine manufacture and clearance of goods without paying central excise duty. The allegations were primarily based on documents recovered from the residence of Shri Sanatan Maity, an accountant of Appellant No.1. The documents indicated transactions involving a pseudo name "Sunderlal," which the Revenue claimed was a cover for Appellant No.2. However, the statements of Shri Ajay Bansal and Shri Sanatan Maity did not conclusively support this claim. The Tribunal noted that the statements and documents did not provide sufficient evidence to prove clandestine activities.

2. Admissibility and Reliability of Documents:
The Tribunal scrutinized the admissibility of the computer printouts and other documents recovered from Shri Sanatan Maity's residence. It was highlighted that the procedures under Section 36B of the Central Excise Act, 1944, which align with Section 65B of the Evidence Act, were not followed. The Supreme Court's ruling in Anvar Pv vs. V.K. Basheer emphasized that electronic records must be accompanied by a certificate detailing their production and authenticity. The lack of such certification rendered the documents inadmissible as evidence. Thus, the Tribunal found that the reliance on these documents by the Revenue was misplaced.

3. Corroboration of Evidence for Clandestine Removal:
The Tribunal emphasized that allegations of clandestine removal must be substantiated with corroborative, independent, cogent, and concrete evidence. The Revenue's case was based on assumptions and presumptions drawn from the documents recovered from a third party's premises. The Tribunal referred to several case laws, including Pan Parag India Ltd. v. CCE, Kanpur, which established that charges of clandestine removal cannot be upheld solely on the basis of documents from third parties without corroborative evidence. The Tribunal concluded that the evidence presented by the Revenue did not meet the required standard of proof.

4. Liability of Penalties on Individuals:
The Tribunal addressed the penalties imposed on individuals associated with the appellant companies. It was argued that once a penalty is imposed on a partnership concern, no separate penalty can be imposed on the partners, as per the Bombay High Court's ruling in CC(E.P.) vs. Jupiter Exports. The Tribunal reduced the penalty on Shri Ajay Bansal, Director of Appellant No.2, to ?30,000 and set aside the penalties imposed on the partners of Appellant No.1, Shri Ajay Bansal and Shri Rajendra Agarwal, in line with the legal precedent.

Conclusion:
The appeals were allowed in part. The Tribunal rejected the central excise duty demands of ?28,53,835/- and ?98,291/- against Appellant No.1 and Appellant No.2, respectively, except for the undisputed amounts. The penalties on the partners were set aside, and the penalty on Shri Ajay Bansal was reduced. The Tribunal emphasized the need for concrete evidence to substantiate serious charges of clandestine removal and highlighted the importance of following statutory procedures for the admissibility of electronic records.