2016 (7) TMI 864 - AT - Central Excise

Clandestine removal of goods - Department has recovered photocopies of four invoices from some sources - recovery of loose sheets of papers - 26 nos. of Gate Pass Books were recovered by the Department - Held that - it is imperative that the contents of photocopies should be compared with the contents of their respective originals. In absence of the original documents the photocopies not being even secondary evidence are not admissible in evidence. No enquiries have been conducted by the Department at the buyer s end to verify as to whether they have purchased the goods covered under the alleged photocopy of invoices from the appellant. Therefore demand of duty in such an eventuality will not sustain. The onus to prove the involvement of the appellants in clandestine activity with the intent to evade payment of duty has not been satisfactorily discharged by the Revenue justifying confirmation of the duty demand. Suspicion however grave cannot replace proof and that the Revenue is not relieved altogether of burden of producing some credible evidence in respect of the facts in issue. In the case in hand admittedly the Revenue has not brought any tangible evidence to discharge its burden of proof of clandestine removal of goods. It is an admitted fact on record that the Department has not carried out any physical verification of alleged shortage in stock and the same was based on eye estimation only. Thus in absence of actual physical weighment of stock of finished goods the allegation of shortage in my considered view is not sustainable. Demand set aside - Decided in favor of assessee.

Issues Involved:
1. Admissibility of photocopies of invoices as evidence.
2. Alleged recovery of three loose sheets of papers.
3. Alleged recovery of 26 gate pass books.
4. Alleged production reports and shortage in stock.
5. Statements of company officials and their subsequent retraction.

Detailed Analysis:

1. Admissibility of Photocopies of Invoices as Evidence:
The Department's case was based on photocopies of invoices allegedly showing clandestine removal of Sponge Iron Fines without discharging Central Excise duty. The appellant contended that these photocopies were inadmissible as evidence since the originals were not produced, and the source of these photocopies was undisclosed. The Tribunal referred to Section 63 of the Evidence Act, 1872, and relevant case law, emphasizing that secondary evidence is inadmissible without satisfactory explanation for the non-production of primary evidence. The Tribunal concluded that photocopies, without the originals, lack evidentiary value and cannot substantiate the duty demand.

2. Alleged Recovery of Three Loose Sheets of Papers:
The Department claimed that three loose sheets showed removal of excisable goods without duty payment. The appellant argued that these were mere photocopies, not recovered from their premises, and lacked corroborative evidence. The Tribunal noted the absence of original documents, the unidentified preparer of the sheets, and lack of confirmation from alleged buyers or transporters. It held that the charges of clandestine removal could not be substantiated based on these loose sheets alone, as they did not meet the required standard of proof.

3. Alleged Recovery of 26 Gate Pass Books:
The Department alleged that gate pass books indicated unaccounted removal of goods. The appellant countered that these gate passes were for Dolachar, and the handwriting on the reverse side was not of their employees. The Tribunal found that affidavits from alleged buyers and transporters denied receipt of the disputed goods. The Tribunal emphasized the need for cross-examination, which was not conducted by the adjudicating authority. It concluded that the affidavits should be accepted as evidence, and the duty demand based on these gate passes was unsustainable.

4. Alleged Production Reports and Shortage in Stock:
The Department relied on alleged production slips and eye-estimated stock shortage to claim clandestine removal. The appellant argued that these slips were unofficial and did not reflect actual production. The Tribunal noted the lack of identification and questioning of the person who prepared these slips, and the absence of corroborative evidence like illicit procurement of raw materials or excess electricity consumption. It held that the allegations of clandestine manufacture and removal were unsubstantiated.

5. Statements of Company Officials and Their Subsequent Retraction:
The Department relied on statements from company officials admitting to duty evasion, which were later retracted. The Tribunal highlighted that retracted statements, without further corroboration, cannot conclusively establish clandestine removal. It referred to case law indicating that retracted statements, along with other defense documents, cannot be solely relied upon for adjudication. The Tribunal found that the Department failed to produce credible evidence to support the allegations of clandestine removal.

Conclusion:
The Tribunal found that the Department did not provide sufficient corroborative evidence to substantiate the allegations of clandestine removal. It emphasized the inadmissibility of photocopies without originals, the need for corroborative evidence, and the unreliability of retracted statements. Consequently, the Tribunal set aside the impugned order, allowing the appeals in favor of the appellants.

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