2017 (11) TMI 825 - AT - Central Excise

Clandestine Removal - appeal is on the sole ground that Gate Register and loose sheets showing the clinker consumption recovered from the factory are evidences to indicate that the assessee was indulging in clandestine removal - Held that - Commissioner has rightly observed that the said two registers cannot be made the basis for arriving at adverse findings against the assessee. For establishing clandestine removal, positive evidence in the shape of procurement of raw materials, actual manufacture of the goods, clearances by transporter, identification of the customers and payment of consideration for such clandestinely removed goods, is required to be produced on record. In the absence of the same, the appellate authority has rightly concluded in favor of the assessee - appeal rejected - decided against Revenue.

Summary

Issues: Alleged clandestine removal of goods, validity of evidence recovered, demand of duty, imposition of penalty

Issue 1: Alleged clandestine removal of goods
The case involved the appellant, engaged in cement manufacturing, facing allegations of clandestine removal of goods based on recovery of Gate Register and Clinker Consumption Report from the factory premises. The central excise officers found discrepancies in the records and the appellant's representatives denied knowledge of these documents. Statements from individuals who allegedly purchased unaccounted cement did not corroborate the allegations. A show cause notice was issued proposing duty demand, interest, and penalty under the Central Excise Act, 1944.

Issue 2: Validity of evidence recovered
The Commissioner(Appeals) observed that the case built by the Department solely relied on the recovered documents without proper seizure procedures. Lack of a seizure memo with witness signatures and absence of details on where and how the documents were recovered raised doubts about their authenticity. The Commissioner held that the Gate Register and Clinker Verification Report lacked reliability as evidence due to insufficient corroboration and absence of supporting evidence establishing clandestine removal.

Issue 3: Demand of duty and imposition of penalty
The Revenue appealed, claiming the recovered registers were evidence of clandestine removal, justifying the duty demand. However, the Commissioner(Appeals) ruled in favor of the appellant, emphasizing the need for positive evidence such as procurement records, manufacturing details, customer identification, and payment proof for clandestine removal allegations. The appellate authority found no infirmity in the Commissioner's order and rejected the Revenue's appeal, highlighting the lack of substantial evidence to support the duty demand and penalty imposition.

In conclusion, the judgment delves into the scrutiny of evidence, procedural lapses in document recovery, burden of proof in clandestine removal cases, and the necessity of corroborative evidence to substantiate allegations. The decision underscores the importance of concrete proof in establishing duty liabilities and penalties, ultimately ruling in favor of the appellant due to insufficient evidence linking them to clandestine activities.