2016 (12) TMI 917 - AT - Central Excise

Clandestine production - balance sheet does not match with the electricity consumption. Further, there is recovery of certain parallel invoices and production slips - Held that - we are in agreement with the findings given in the impugned order passed by the Commissioner (Appeals), which are on based on the ratio laid down by Supreme Court in the cases of Oudh Sugar Mills Ltd. 1962 (3) TMI 75 - SUPREME COURT OF INDIA , where it was held that Not because an error due to carelessness in maintaining the registers properly as required by Rule 83 does not amount to a contravention of that rule; the only reason why we mention this is that in a factory where the turnover of sugar is so considerable and the operations conducted in which the human element plays a significant part it would not be right to base calculations on the surmise that over filling of the tanks was being practised systematically. No doubt, during the test, the tanks were slightly over filled on nine out of ten occasions as pointed out by the Assistant Chemical Examiner. But this could be attributed to a slight failure of the human element resulting from the fact that a special operation was being conducted by the operators in the presence of a Government official. We would, however, make it clear that these observations are just incidental and are not the basis of our decision. Appeal dismissed - decided against Department.

Summary

Issues: Appeal against dropping of duty demand based on alleged clandestine production and clearance of goods.

Analysis:
1. Main contention of the Revenue: The Revenue contended that discrepancies exist between the production and sale of plywood as shown by the respondent in the balance sheet and the electricity consumption. Moreover, the Revenue highlighted the recovery of parallel invoices and production slips, alleging clandestine production based on extra electric consumption and the said documents.

2. Cross objections by the Respondent: The respondent filed cross objections stating that the Department failed to provide evidence regarding the flow of cash to raw material suppliers or from buyers of the allegedly removed goods without duty payment. Additionally, the respondent claimed that they were coerced into signing certain statements.

3. Findings of the impugned order: The impugned order emphasized the need for concrete evidence to substantiate clandestine clearances beyond reasonable doubt. It cited legal precedents to assert that suspicion, without concrete proof, cannot establish guilt. The order highlighted that mere recovery of parallel invoices is insufficient to prove evasion of duty without independent corroborative evidence.

4. Judicial reasoning: The Tribunal, after a thorough review of the facts and legal arguments, concurred with the findings of the Commissioner (Appeals). The Tribunal referenced Supreme Court cases to support its decision, emphasizing the importance of tangible evidence in establishing clandestine activities and duty evasion. Consequently, the Tribunal upheld the impugned order, citing legal precedents and the lack of substantial evidence supporting the Revenue's claims.

5. Decision: Ultimately, the Tribunal dismissed the appeal filed by the Revenue, affirming the Commissioner (Appeals) order. The decision was based on the principles established by the Supreme Court and previous Tribunal rulings, underscoring the necessity of concrete evidence to substantiate allegations of clandestine activities and duty evasion.