2017 (11) TMI 341 - AT - Central Excise

Clandestine removal - yarns - Revenue entertained a view that the said yarn was clandestinely cleared by the appellant to the three units ie., M/s. Gowri Textiles, M/s. Sri selvapathy Textiles and M/s. Arulmathi Tex, who are sister concerns of the present appellant with the same Managing Director Shri S. Rangasamy being a partner in those three units - Held that - the above view entertained by Revenue may be a cause of doubt against the appellant but cannot by itself, take the shape of evidence so as to confirm the findings of clandestine activities against the assessee. I have also examined the statement of Shri Rangasamy which is merely to the effect that he is not able to show the invoices in respect of the alleged clearances and if the Revenue is of the view that such yarn received by the sizing units has been cleared from their factory, without payment of duty, he is ready to pay the duty. Apart from the fact that confessional statements cannot be adopted solely for arriving at the clandestine removal findings, I find that the said statement of Shri S.Rangasamy cannot be held to be confessional statement, in strict sense, in as much as there is no acceptance of the fact that they were indulging in clandestine activities - Revenue has not examined the scribe of the entries made in the receipt book of the sizing mills, on the basis of which the entire case of the Revenue is made. The findings of the lower authorities are based upon the surmises and conjectures and there is virtually no evidence produced by the Revenue to establish clandestine removal against the assessee. It is also to be noted that during the relevant period the appellant s factory was put to stock taking, by the officers themselves, not once but three times and no discrepancies were found either in the raw materials stock or the final product stock. In such a scenario, the appellants cannot be held to be indulging in clandestine activities and it is for the Revenue to produce the evidence to support its allegations. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand of duty, imposition of penalty, abatement of appeal due to death of party, alleged clandestine removal of yarn, evidence required for establishing clandestine removal.

Confirmation of demand of duty and imposition of penalty:
The judgment deals with the confirmation of demand of duty against a company and the imposition of penalties. The company, engaged in manufacturing cotton cone yarns, faced allegations of clandestine removal of yarn during specific periods. The original adjudicating authority confirmed the duty, which was upheld by the Commissioner (Appeals), leading to the present appeal. The Revenue's case relied heavily on entries in receipt books of other units, suggesting that the yarn in question was cleared without payment of duty. However, the Tribunal found that the evidence presented did not conclusively prove clandestine activities. The appellant's factory had undergone stock taking multiple times without discrepancies, indicating no wrongdoing. The judgment emphasized the need for positive and tangible evidence to establish clandestine removal, citing legal precedents where mere confessional statements were deemed insufficient without corroborating evidence. Ultimately, the Tribunal set aside the impugned order, allowing the appeal of the company.

Abatement of appeal due to death of party:
The judgment also addressed the abatement of an appeal due to the death of a party involved. The appeal filed by the deceased, who was the Managing Director of the company, stood abated as per Rule 22 of CESTAT Procedural Rules. The Tribunal acknowledged the death certificate filed on record and proceeded with the appeal filed by the company separately.

Alleged clandestine removal of yarn and evidence required:
The case revolved around allegations of clandestine removal of yarn by the company to other units. The Revenue suspected that the yarn was cleared without payment of duty based on entries in receipt books of related units. However, the Tribunal found the evidence presented insufficient to establish clandestine activities conclusively. It highlighted the lack of concrete evidence such as excess raw material receipts, shortage of finished goods, or incriminating statements from related parties. The judgment stressed the importance of independently establishing clandestine removal with positive and tangible evidence, citing legal precedents to support the requirement for corroborating evidence alongside confessional statements. The Tribunal concluded that the findings of lower authorities were based on surmises and conjectures, lacking substantial evidence to uphold the charge of clandestine removal. Consequently, the impugned order was set aside, and the appeal of the company was allowed.