2018 (5) TMI 1412 - AT - Central Excise

Clandestine removal - M.S. Ingots - whether the principal Commissioner in its impugned order in original dated 11.01.2018 is justified in confirming the demand of Central Excise duty of ₹ 2,56,803./- alongwith interest and penalty, in respect of clandestine removal of 80.695 the MT of M.S Ingots recovered from the appellant? - Held that - In the impugned order nowhere it has been discussed as to how the demand of duty of ₹ 2,56,803/- is sustainable in the absence of any clinching evidence of clandestine manufacture and removal of the goods - There is absolute no evidence on record to show that the appellant-Ms. Ashok Ispat Udyog had cleared 80.695 MT of MS ingots and entire demand is purely based upon the statement of Sh. S.K. Pansari Prop. of M/s. Monu Steel. Only on the basis of statement of third person no demand could be made - penalty on Director also set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Clandestine removal of M.S. Ingots, confirmation of demand of Central Excise duty, evidence based on third-party records.

Analysis:
The judgment addresses the issue of clandestine removal of M.S. Ingots and the confirmation of the demand of Central Excise duty. The case revolves around a Show Cause Notice issued to the appellant, proposing a demand of duty, interest, and penalties. The revenue's case is primarily based on records recovered from another entity, M/s. Monu Steel. Despite opportunities, M/s. Monu Steel did not appear for cross-examination. The impugned order dropped the total duty amount but confirmed the demand of duty for 80.695 MT of M.S. Ingots. However, the order lacks discussion on the sustainability of this demand in the absence of concrete evidence of clandestine activities. The judgment emphasizes that mere statements of third parties are insufficient to establish a demand, citing a similar case where demands based solely on third-party records were set aside.

The judgment highlights the importance of corroborative evidence in cases of clandestine removal. It references legal precedents where findings of clandestine activities were not upheld solely based on third-party documents. The law is clear that without clinching evidence of clandestine manufacture and removal of goods, relying on third-party records alone is insufficient. In this case, the absence of corroborative evidence leads to the setting aside of the impugned order and the allowance of both appeals with consequential relief to the appellants. The judgment emphasizes that the penalty imposed on the director is also set aside in light of the legal position and factual circumstances of the case.

In conclusion, the judgment allows the appeal and sets aside the impugned order due to the lack of substantial evidence supporting the demand of Central Excise duty for clandestine removal of M.S. Ingots. The decision underscores the necessity of corroborative evidence and the insufficiency of relying solely on third-party records to establish such demands.