2016 (7) TMI 495 - AT - Central Excise

Clandestine removal of manufactured M.S. Ingots - confiscation - redemption fine and penalty - Held that - While there is a basis to proceed with further investigation to establish clandestine manufacture and clearance, the case is not complete as no element of evidence has been unearthened which can even indirectly indicate clandestine manufacture and clearance thereafter without payment of duty on M.S. Channels. Even the quantum of un-accounted clearance of M.S. Channels is arrived at by derivative calculation based on comparable figures for a particular month. Ld. Commissioner (Appeals) observed that the admitted facts need not be proved. Here, it has to be noted that there is no admission by the appellants regarding procurement, manufacture or clearance of any excisable items. Applying an admission of third party to demand duty from the appellant without any corroboration of manufacture and clearance will not be legally justifiable. In fact, the impugned orders admit that the Department was not in a position to investigate the case at the buyer s end of the appellants as details were not disclosed by the appellants. Since the appellants are denying any such clearance, it is for the Department to adduce evidence of clandestine manufacture and clearance. The evidences alleged are not sufficient enough to sustain the case of the Department and accordingly, the impugned orders are not sustainable. - Demand set aside - Decided in favor of appellant.

Summary

Issues: Allegation of non-payment of duty on M.S. Channels based on clandestinely received M.S. Ingots.

Analysis:
The judgment by the Appellate Tribunal CESTAT NEW DELHI pertains to two appeals concerning the non-payment of duty by the main appellant, M/s.R.K. Organics Chemicals (Rolling Mills). The case originated from investigations conducted by DGCEI at the premises of M/s. Hanumant Ispat Pvt. Ltd., where it was discovered that the main appellant was one of the consignees of M.S. Ingots cleared without duty payment. The proceedings were initiated based on this information, demanding duty on M.S. Channels purportedly manufactured using the clandestinely received M.S. Ingots. The Original Authority confirmed the duty demand, penalties, and confiscation, which were partly upheld by the Commissioner (Appeals). The present appeals challenge the Commissioner (Appeals)'s orders.

The appellants argued that the case relied heavily on third-party details and statements, specifically about the supply of unaccounted M.S. Ingots to the main appellant. They contended that beyond these details, there was no evidence of manufacturing, clearance of finished goods, or receipt of sale proceeds related to M.S. Channels. The Department, represented by the AR, asserted that there were corroborative evidences of the supply of M.S. Ingots to the main appellant without proper accounting, leading to allegations of clandestine manufacture and non-duty paid clearance of M.S. Channels.

Upon hearing both sides and examining the appeal records, the Tribunal noted that the case revolved around the alleged clandestine manufacture and clearance of M.S. Channels. While evidence existed regarding the supply of M.S. Ingots to the main appellant without proper accounting, there was a lack of direct evidence linking this to clandestine manufacture and clearance of M.S. Channels. The Tribunal emphasized the need for corroboration and evidence at each stage of the alleged clandestine activities, including procurement of raw materials, manufacture, and clearance. In this case, the evidence only supported the first stage, with no substantial proof of subsequent stages. The Tribunal concluded that the Department's evidence was insufficient to sustain the case, leading to the setting aside of the impugned orders and allowing both appeals.

In summary, the judgment highlighted the importance of substantial evidence and corroboration at each stage of alleged clandestine activities to establish duty liability conclusively. The lack of direct evidence linking the supply of M.S. Ingots to clandestine manufacture and clearance of M.S. Channels led to the reversal of the lower authorities' decisions.