2018 (4) TMI 956 - AT - Central Excise

Clandestine removal - corroborative evidences - Department has demanded the duty for the reason that there was high electricity consumption and on the basis of invoices / vouchers recovered during the period of search. Held that - Apart from electricity consumption, no other corroborative evidence was collected by the department. No buyer of the finished goods was found or examined. No vouchers pertaining to raw material supply or inputs was found during the course of search. Other evidence regarding inputs, labour, transport were also not collected by the department - the clandestine removal is a very serious charge for which substantial evidence is required. Since, the department has not proved the clandestine removal of the finished goods with any corroborative evidence and made out a full proof case, demand cannot be confirmed - appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine removal of goods, high electricity consumption, fabrication of sale invoices, lack of corroborative evidence.

Analysis:
1. Alleged Clandestine Removal of Goods: The case involved a search at the business premises leading to the discovery of seized goods and vouchers. The department alleged clandestine removal based on the lack of registration, absence of excise duty payments, and insufficient record-keeping. The appellant contested the claim, arguing that the quantity of goods demanded by the department was beyond their production capacity. The appellant also highlighted inconsistencies in the department's case, emphasizing the lack of substantial proof beyond presumption and assumption.

2. High Electricity Consumption: The department justified the duty demand by pointing to high electricity consumption during the relevant period, indicating clandestine manufacturing. The appellant countered this argument by explaining the need for extra electricity due to fluctuations and breakdowns, especially for restarting the furnace. The tribunal acknowledged the validity of this explanation, considering the practical implications of electricity usage in manufacturing processes.

3. Fabrication of Sale Invoices: The appellant admitted to preparing fake sale invoices to secure advances from the bank due to financial constraints. The department's case relied on recovered invoices, while the appellant argued that these invoices were fabricated solely for financial purposes. The tribunal noted the absence of other supporting documents like purchase invoices or transport records, reinforcing the appellant's claim of invoice fabrication for financial gain.

4. Lack of Corroborative Evidence: Both parties presented conflicting evidence regarding the authenticity of vouchers and the existence of buyers for the finished goods. The department asserted the genuineness of vouchers and sale bills, while the appellant provided a letter to the bank as evidence of fabricated invoices. The tribunal emphasized the importance of substantial evidence in cases of clandestine removal, highlighting the lack of corroborative evidence beyond the disputed invoices.

5. Judgment: After thorough consideration of the arguments and evidence presented, the tribunal concluded that the department failed to substantiate the allegations of clandestine removal with conclusive proof. Citing the lack of corroborative evidence and the discrepancy between the alleged quantity of goods and the seized value, the tribunal set aside the impugned order, ultimately allowing the appeals filed by the appellants.