2017 (2) TMI 1040 - HC - Central Excise

Clandestine Removal - Tobacco - clearance of 39,44,21.52 Kilograms of Gutkha or 1,97,21,05,260 number of pouches of 2 Grams each - Whether, in the facts and circumstance of the case, in the absence of any tangible of evidence about manufacture and and removal of the goods the department could draw the inference about clandestine manufactured and removal merely on the basis of presumptions and assumptions? - Held that - there is cogent, clear and clinching evidence for clandestine manufacture of tobacco product - the Tribunal based upon the evidence has rightly passed the impugned order and in respect of substantial question of law, the answer is that there was sufficient evidence about the manufacture and removal of goods and the Department has rightly drawn inference about clandestine manufacture and removal. Whether, in the facts and circumstances of the case, the Tribunal is justified in coming to the conclusion that the appellants have clandestinely manufactured Gutkha and cleared the same without payment of excise duty merely on the basis of LRs when there is no proof of actual delivery of the raw materials said to have been transported under the LRs. to the appellant and the persons said to have accompanied the trucks could not be identified? - Held that - The Tribunal was justified to coming to conclusion that appellant was involved in clandestine manufacture of the goods and clearing of the same without payment of Excise Duty. Whether, the alleged receipt of one of the raw materials viz. scented tobacco by itself was sufficient to hold that there was corresponding manufacture and clandestine clearance of Gutkha (pan masala) when there is no evidence of purchase of other major ingredients like supari, katha, lime, menthol and kimam and there is also no evidence regarding manufacture of Gutkha as also in respect of clearance and financial transactions the same? - Held that - The receipt of raw material coupled with other evidence as discussed by this Court and by the Tribunal, the Tribunal was justified in holding that there was corresponding manufacture and clandestine clearance of Gutkha by the appellant. Appeal dismissed - decided against Appellant.

Summary

Issues Involved:
1. Whether the department could draw an inference about clandestine manufacture and removal of goods based on presumptions and assumptions in the absence of tangible evidence.
2. Whether the Tribunal was justified in concluding that the appellants clandestinely manufactured and cleared Gutkha without payment of excise duty based on Lorry Receipts without proof of actual delivery.
3. Whether the receipt of one raw material (scented tobacco) was sufficient to hold that there was corresponding manufacture and clandestine clearance of Gutkha without evidence of other major ingredients or financial transactions.

Detailed Analysis:

Issue 1: Inference Based on Presumptions and Assumptions
The appellant argued that the Tribunal's order was not based on tangible evidence about the manufacture and removal of goods, but rather on presumptions and assumptions. The appellant emphasized that the department drew inferences about clandestine manufacture and removal without concrete proof. The Tribunal, however, relied on various pieces of evidence, including Lorry Receipts and statements from transporters, to conclude that the appellant was involved in clandestine activities. The court found that the evidence presented, such as the Lorry Receipts from Sarita Roadways and the statements of individuals involved, was sufficient to draw an inference of clandestine manufacture and removal.

Issue 2: Justification of Tribunal's Conclusion Based on Lorry Receipts
The appellant contended that the Tribunal erroneously concluded that they clandestinely manufactured and cleared Gutkha based on Lorry Receipts without actual proof of delivery of raw materials. The Tribunal relied on Lorry Receipts and statements from transporters, despite the appellant's argument that these documents did not conclusively prove delivery to their factory. The Tribunal noted that the Lorry Receipts indicated the names of the appellant's firms and the goods transported, which were maintained in the ordinary course of business. The Tribunal found the evidence from Sarita Roadways reliable and concluded that the appellant received raw materials for clandestine manufacture. The court upheld the Tribunal's findings, stating that the evidence presented was sufficient to support the conclusion of clandestine manufacture and clearance.

Issue 3: Sufficiency of Evidence for Corresponding Manufacture and Clearance
The appellant argued that the receipt of scented tobacco alone was insufficient to prove corresponding manufacture and clandestine clearance of Gutkha, as there was no evidence of other major ingredients or financial transactions. The Tribunal considered the receipt of raw materials, such as scented tobacco, and other corroborative evidence, including statements from individuals involved in the transportation and supply chain. The Tribunal concluded that the receipt of raw materials, coupled with other evidence, indicated that the appellant was involved in clandestine manufacture and clearance of Gutkha. The court agreed with the Tribunal's assessment, finding that the evidence presented was adequate to establish the appellant's involvement in clandestine activities.

Conclusion:
The court dismissed the appeal, affirming the Tribunal's decision that the appellant was involved in clandestine manufacture and clearance of Gutkha without payment of excise duty. The court found that the evidence presented, including Lorry Receipts and statements from transporters, was sufficient to support the Tribunal's conclusion. The court also upheld the Tribunal's reliance on the receipt of raw materials and other corroborative evidence to establish clandestine manufacture and clearance.