2018 (4) TMI 831 - AT - Central Excise

Clandestine removal - demand based upon the entries made in the records of one M/s Monu Steels, who is a consignment agent - Held that - The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand of duty, interest, and penalty along with penalty on the Director based on Rule 26 of Central Excise Rules, 2002.

Analysis:
The case involved the confirmation of a demand of duty, interest, and penalty, including a penalty on the Director under Rule 26 of the Central Excise Rules, 2002. Initially, a demand of approximately &8377; 10.83 crores was issued against the appellant for clandestine removal based on electricity consumption. However, the Commissioner dropped a major part of the demand but upheld a demand of &8377; 3,19,267. This demand was linked to entries in the records of a consignment agent, M/s Monu Steels, indicating sales to M/s Sapna Steels without payment of duty. The appellant's name was recorded as "S. Iron" in the consignment agent's records, referring to M/s Shree Consultants Pvt. Ltd.

The Revenue's case relied heavily on records from M/s Monu Steels, where the appellant's name was misspelled as "S. Iron." Despite this, the Revenue assumed that "S. Iron" referred to the appellant's clearances based on a statement from M/s Monu Steels' representative. However, the Director of the appellant denied any knowledge of M/s Monu Steels when contacted by the Revenue. Importantly, the Revenue did not investigate the buyer, M/s Sapna Steels, and solely relied on M/s Monu Steels' records.

The Tribunal's decision highlighted the well-established principle that third-party records alone cannot serve as sufficient evidence for establishing clandestine removal without corroborative evidence. Citing various judgments, including those from the Hon'ble Allahabad High Court and previous Tribunal decisions, it was emphasized that findings of clandestine removal must be supported by conclusive evidence. As there was no corroborative evidence in this case and in line with the legal precedent, the impugned orders were set aside, and both appeals were allowed in favor of the appellants.