2018 (5) TMI 776 - AT - Central Excise

Clandestine removal - sponge iron - Revenue entertained a view that the sponge iron received by the present appellant in a clandestine manner was further used by them in the manufacture of ingots and TMT bars which were cleared by them without payment of duty - Held that - apart from the ledger of M/s Shilpy Steels Revenue has not made further investigations. No statement of the Production Manager or any other employee of the appellant stands recorded by the Revenue so as to indicate manufacture of the final product. Further there is no identification of the buyers to whom the said alleged clearances were made. 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. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Allegation of clandestine manufacture and removal
- Reliability of evidence based on third-party records
- Admissibility of third-party records in establishing clandestine removal

Analysis:
The case involves allegations of clandestine manufacture and removal against M/s Hariom Ingot & Power Pvt. Ltd. based on evidence recovered from a pen drive seized from M/s Shilpy Steel Pvt. Ltd. The Revenue claimed that sponge iron received by M/s Hariom Ingot & Power Pvt. Ltd. in a clandestine manner was used in manufacturing ingots and TMT bars cleared without duty payment. The proceedings initiated resulted in a demand notice of ?1,51,778 for May 2009, upheld by the original adjudicating authority and the Commissioner (Appeals), leading to the present appeals.

Upon reviewing the impugned orders, the Member (Judicial) noted that the Revenue's case heavily relied on the printout from the pen drive and statements from M/s Shilpy Steel Pvt. Ltd. The Director of M/s Hariom Ingot & Power Pvt. Ltd. admitted to procuring sponge iron from M/s Shilpy Steel Pvt. Ltd. but denied receiving it without proper documentation. The Revenue failed to conduct further investigations, record statements from key personnel, identify buyers, transporters, or payment methods, thus lacking substantial evidence to prove clandestine removal.

The judgment emphasized established legal principles regarding the admissibility of third-party records as evidence in cases of clandestine removal. Citing precedents like the Hon'ble Allahabad High Court decision and various Tribunal cases, it was held that findings of clandestine removal cannot be upheld solely based on third-party documents without concrete evidence of clandestine manufacture and removal. Consequently, the impugned order was set aside, and both appeals were allowed in favor of the appellant, granting consequential relief.

In conclusion, the judgment highlights the importance of substantial, positive, and tangible evidence to prove allegations of clandestine activities, emphasizing the necessity for corroborative evidence beyond third-party records to establish liability in such cases.