2018 (2) TMI 1020 - AT - Central Excise

Clandestine manufacture and removal - shortage of stock - on examination of the electrical power consumption for the period from 5.8.2011 to 18.1.2012, it was found that there is huge gap in the electric power consumption and case of production per metric ton (PMT) ranging from ₹ 1972/- per M.T. during December 2011 to January 2012 to ₹ 2171/- per MT during August 2011 - demand is based upon the private note book and invoice books recovered from the room of Shri Kuldeep Saini, the Supervisor of the Appellant Company. Held that - The officers has not been able to find single buyer of the said goods shown to have received the goods from the Appellant. There is no corroboration with goods having been received by any single person. Even not a single statement of transporter or driver of vehicle has been recorded to show that the goods allegedly were removed from the Appellant factory without payment of duty. No investigation has been undertaken from the raw material supplier as whether any goods were received by the Appellant in clandestine manner. Though the show cause notice has relied upon the statement of weighbridge owner to allege that the clandestinely cleared goods by the Appellant were weighed at the said weighbridge, however even the vehicle owner or drivers were not questioned whose vehicle numbers were mentioned in the weighbridge register - no evidence in the form of receipt of amount towards consideration of such alleged clandestine clearance has been brought on record. The revenue has alleged that the looking to the power consumption it shows that the Appellant had manufactured and cleared the goods without payment of duty - Held that - only on the basis of electricity consumption without showing commensurate quantity of raw material consumed, source of procurement of excess raw material, payment made to raw material supplier, excess labour involved, clearance of finished goods its transportation and receipt of consideration of finished goods, the demand cannot be made - demand not sustainable. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of clandestine removal of goods.
2. Reliability of evidence based on private notebooks and unnumbered invoice books.
3. Examination of electricity consumption as evidence of production.
4. Lack of corroborative evidence for the alleged clandestine activities.
5. Validity of the demand based on the above allegations.

Detailed Analysis:

1. Allegation of Clandestine Removal of Goods:
The appellant was accused of clandestine removal of goods based on evidence found during a search at the factory premises, including blank unnumbered invoice books and private notebooks showing production and clearance details. The proprietor admitted to maintaining these records and using unnumbered invoices to evade excise duty. However, the appellant argued that there was no evidence of clandestine removal, and the proprietor had retracted his statement. The tribunal found that the demand was primarily based on these private records without further investigation to identify buyers or transportation details, thus lacking corroborative evidence.

2. Reliability of Evidence Based on Private Notebooks and Unnumbered Invoice Books:
The tribunal noted that the demand was based on private notebooks and unnumbered invoice books recovered from the supervisor's room. The appellant contended that these records were maintained without the proprietor's knowledge and that the department did not investigate further to establish the veracity of these records. The tribunal cited previous judgments, including CCE, Chennai Vs. Dhanvilas (Madras) Snuff Co., which held that mere entries in private notebooks are insufficient to prove clandestine removal without corroborative evidence.

3. Examination of Electricity Consumption as Evidence of Production:
The department also relied on discrepancies in electricity consumption to allege clandestine production and removal of goods. The appellant argued that the factory faced unscheduled power cuts and agitation-related shutdowns, leading to higher power consumption. The tribunal found that without evidence of excess raw material procurement, labor involvement, or transportation of finished goods, the demand based on electricity consumption alone was untenable. The tribunal referenced the RA Castings case, where similar allegations based on electricity consumption were dismissed.

4. Lack of Corroborative Evidence for the Alleged Clandestine Activities:
The tribunal emphasized the absence of corroborative evidence, such as statements from buyers, transporters, or raw material suppliers. The department did not investigate the alleged buyers or verify the procurement of raw materials. The tribunal reiterated that the charge of clandestine removal must be supported by concrete evidence, including production records, buyer details, transportation, and receipt of sale proceeds. The tribunal cited multiple cases, including T.G.L. Poshak Corporation, which underscored the necessity of corroborative evidence to substantiate allegations of clandestine removal.

5. Validity of the Demand Based on the Above Allegations:
Given the lack of corroborative evidence and reliance solely on private records and electricity consumption, the tribunal found the demand unsustainable. The tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, to the appellant.

Conclusion:
The tribunal concluded that the allegations of clandestine removal were not substantiated by sufficient and corroborative evidence. The reliance on private notebooks, unnumbered invoice books, and electricity consumption without further investigation or corroboration was inadequate to uphold the demand. Consequently, the impugned order was set aside, and the appeal was allowed.

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