2018 (4) TMI 1304 - AT - Central Excise

Clandestine removal - Sponge Iron - shortage of finished goods - demands based on documents recovered from Shri Ambika Ispat and the statements of various persons - time limitation u/s 11A (1) of the Act - Held that - The demand is wholly presumptive, based on suspicions and /or investigation conducted at the end of the so-called supplier Shri Ambika Ispat - The revenue have not found any irregularity in the affairs of these appellants, who are all registered manufacturers with the Department and have maintained regular books of accounts and filed regular returns which have been duly accepted by the Department. Suspicion howsoever strong cannot take the place of evidence for visiting the assessee with duty liability for alleged clandestine removal. The demands are presumptive and not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Allegation of clandestine removal of finished goods (Sponge Iron) by M/s Ambika Ispat without payment of Central Excise duty.
2. Admissibility of evidence collected during the investigation.
3. Invocation of extended period for issuing show cause notice.
4. Validity of penalties imposed on the recipient units and their authorized persons/directors.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Removal:
The case revolves around the allegation that M/s Ambika Ispat (India) Pvt. Ltd. was involved in the large-scale evasion of Central Excise duty by clandestinely removing Sponge Iron without issuing proper invoices. Investigations revealed several incriminating documents, such as Sauda Register, Central Excise Invoices, and weighbridge reports, which indicated substantial discrepancies. The physical verification of finished goods showed a shortage of 6257.770 MT of Sponge Iron. Statements from various individuals, including directors and employees, corroborated the clandestine removal of goods. The directors admitted to the clandestine removal of a total of 8411.770 MT of Sponge Iron, attracting a duty liability of ?1,57,27,483, which was settled with the Settlement Commission.

2. Admissibility of Evidence:
The evidence collected included documents recovered from the factory and the residence of a peon, statements from employees, and corroborative statements from transporters. The documents indicated the clandestine removal of 4288.18 MT of Sponge Iron to various manufacturers. However, the recipients denied receiving the clandestine goods. The Tribunal noted that the demand was based on presumptions and suspicions rather than concrete evidence. The Tribunal emphasized that suspicion, however strong, cannot replace evidence.

3. Invocation of Extended Period for Issuing Show Cause Notice:
The appellants argued that the show cause notice issued in August 2015 was time-barred as per Section 11A(1) of the Central Excise Act. They contended that the investigation initiated on 15/12/2010 and the statements recorded until 10/01/2012 indicated that the clearances took place between July/August 2010 and October 2010. The Tribunal found that the learned Commissioner (Appeals) erroneously considered the 5-year period as the normal period of limitation. The Tribunal held that the revenue did not establish suppression of facts with intent to evade duty, making the invocation of the extended period invalid.

4. Validity of Penalties Imposed:
Penalties were imposed on the recipient units and their authorized persons/directors based on the assumption that they received non-duty paid Sponge Iron and cleared finished goods without payment of duty. The Tribunal found that the revenue did not present any irregularities in the records of the appellants, who maintained regular accounts and filed returns. The Tribunal cited the case of M/s HSR Re-rolling Pvt. Ltd. vs. CCE, Raipur, where it was held that allegations based solely on supplier documents without corroborative evidence are unsustainable. Consequently, the Tribunal set aside the penalties imposed.

Conclusion:
The Tribunal concluded that the demands were presumptive and not sustainable, as they were based on suspicions without concrete evidence. The impugned orders were set aside, and the appeals were allowed with consequential relief to the appellants.