2017 (9) TMI 15 - AT - Central Excise

Clandestine removal - cotton cone yarn of various counts - Revenue entertained a view that the said manufacturing unit must be raising the invoices but have not accounted the same in the statutory records - Held that - It is for the Revenue to prove by production of tangible evidence that the appellant had been indulging in clandestine activities. Needless to observe that such corroboration cannot be by mathematical precision but should be atleast to an extent so as to inspire confidence even in the theory of preponderance of probabilities - In the present case, apart from the entries in the yarn broker s diary and the transporter s records, there is virtually no evidence establishing manufacture of such a huge quantity of yarn, their clearance etc - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Allegations of clandestine removal based on third-party documents without corroborative evidence.

Analysis:
The judgment involves two appeals by a manufacturing unit and its Managing Director arising from impugned orders related to allegations of clandestine removal based on entries in a diary seized from a yarn broker and records of transporters. The Revenue contended that the manufacturing unit cleared goods without payment of duty, leading to initiation of proceedings resulting in a demand of duty, interest, and penalties. The original adjudicating authority confirmed the demand and imposed penalties on both the manufacturing unit and the Managing Director. The appellants challenged this order before the Commissioner (Appeals), arguing that the findings of clandestine removal lacked corroborative evidence. However, the appellate authority upheld the demand based on the entries in the third-party documents, rejecting the appeals.

Upon reviewing the impugned order, the Judicial Member found that the Revenue's case heavily relied on the diary seized from the yarn broker and the transporters' records. The Member noted the absence of efforts by the Revenue to contact consignees or verify facts independently. Citing legal precedents, the Member emphasized the necessity of positive evidence to establish allegations of clandestine removal. Referring to a specific case law, it was highlighted that reliance on third-party documents alone is insufficient without proving their genuineness with corroborative evidence. The Member stressed that tangible evidence is crucial for proving clandestine activities, and mere entries in third-party records are inadequate without additional verification. The lack of evidence regarding manufacturing, clearance, consignees, procurement of raw materials, and employee statements led the Member to set aside the impugned orders and allow both appeals, providing consequential relief to the appellants.

In conclusion, the judgment underscores the importance of tangible evidence and independent verification in establishing allegations of clandestine removal. It highlights the need for corroborative evidence beyond third-party documents to uphold duty demands and penalties, emphasizing the significance of thorough investigation and factual substantiation in such cases.