2016 (10) TMI 677 - AT - Central Excise

Suppression of facts - clandestine removal of finished products - demand of duty along with interest and penalty - documents seized on search of premises did not tally with facts supplied - Held that - the Commissioner (Appeals) has erred in taking the view that there is not enough evidence of clandestine removal of goods. Even though the statement of Shri Sanjay Kejriwal, who is said to be the author of the private records recovered has not been recorded, it stands admitted by Shri Tekriwal, Director about the truth of the contents of the private notebooks. Consequently, I find no reason to disallow this piece of evidence. The evidence of clandestine clearance has been brought on record only as a result of investigation undertaken by the department. The evidences unearthed by the department are not statutory documents and would have gone undetected but for the investigation. Therefore this is a clear case of suppression of facts from the department and certainly the extended period of limitation is invocable in this case and hence the demand cannot be held to be time barred. The Commissioner (Appeals) order setting aside the demand is not proper. The demand is based on evidence which stands admitted by Director on records recovered from the assesses factory. There is nothing on record to the effect that statements relied upon have been extracted under duress. The Director also has voluntarily stated that he is satisfied with the manner of stock taking and search - in present case the demand is on the basis of private records seized in search and which have been admitted by the Director himself as pertaining to clandestine clearances. I also find that duty also stands demanded only on those clearances which are not covered by invoices. Demand justified - appeal allowed - decided in favor of Revenue.

Summary

Issues Involved:
1. Shortages in raw materials and finished goods.
2. Alleged clandestine removal of goods.
3. Admissibility and reliability of evidence.
4. Time-barred nature of the demand.
5. Errors in the calculation of demand.

Detailed Analysis:

1. Shortages in Raw Materials and Finished Goods:
The departmental officers conducted a verification of inputs and finished products on 6.6.2003, finding shortages in raw materials and finished goods. Specifically, there were shortages of 31.205 MT of Sponge Iron & M.S. Ingots and 15.213 MT of Steel Ingots. These shortages were admitted by the Director, Shri N.P. Tekriwal, and the duty due on these shortages amounting to ?65,285/- was already paid by the assessee.

2. Alleged Clandestine Removal of Goods:
Based on the investigation, the department concluded that the assessee had cleared inputs and finished products clandestinely without payment of duty. Loose papers, kacha papers, and notebooks were recovered, which contained entries related to the receipt of raw materials and dispatches of finished goods. The Director admitted in his statement that some goods were dispatched without payment of duty and without cover of invoices. The demand for duty amounting to ?14,12,984/- was raised based on these findings.

3. Admissibility and Reliability of Evidence:
The Commissioner (Appeals) set aside the demand on the grounds that there was not enough evidence of clandestine removal, no investigation with the recipient of the goods, and the case was based solely on the confessional statement of the Director. However, the Tribunal found that the Director’s statement was specific and inculpatory, admitting the truth of the entries in the private notebooks and the charts prepared by the department. The Tribunal held that the statement, which was never retracted, was admissible as evidence, supported by the Supreme Court decision in CCE Vs. Systems & Components Pvt. Ltd.

4. Time-Barred Nature of the Demand:
The Commissioner (Appeals) also held that the demand was time-barred. However, the Tribunal found that the evidence of clandestine clearance was unearthed only due to the department's investigation, indicating suppression of facts. Consequently, the extended period of limitation was applicable, and the demand was not time-barred.

5. Errors in the Calculation of Demand:
The assessee argued that there were errors in the charts prepared by the department, and accounted clearances were not deducted while calculating the demand. The Tribunal noted that the Commissioner (Appeals) could have remanded the matter for correction of such errors. Nonetheless, the Tribunal found that the demand was based on evidence admitted by the Director, and the errors did not invalidate the overall findings.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals) and reinstated the Order-in-Original, confirming the demand for duty based on the evidence of clandestine clearances admitted by the Director. The Tribunal found that the Commissioner (Appeals) erred in dismissing the demand due to insufficient evidence and time-barred claims. The appeal filed by Revenue was allowed, and the demand was upheld.