2018 (7) TMI 170 - AT - Central Excise

Clandestine removal - no corroborative evidences - demand based solely on third party documents - Held that - It is a fact that the Revenue has not adduced any corroborative evidence to show the movement of 150.040 MT of MS Ingots from the premises of the SSPL to the Appellant or movement of 144.038 MT of MS Angles/ channels and 3.008 MT of Waste and Scrap (end cutting) from the premises of the Appellant to any buyers or the customers nor they brought on record any evidence as to who is buyers of 144.038 MT of MS Angles/ channels and 3.008 MT of Waste and Scrap (end cutting) allegedly sold by the Appellant. The law as to whether the 3rd 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 settled. Only on the basis of statement of third party no demand could be made. The show cause notice has been issued and the demand for the month of May, 2010 has been confirmed merely on the basis of the ledger account retrieved from the pen drive for the period from 2009 to 2011 seized from the premises of SSPL on 7.7.2011 and there is no evidence to prove that such unaccounted figure has actually been received by the Appellant. Mr. Nitin Agrawal, Director of SSPL also in his statement nowhere mentioned the name of the Appellant - demand cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand of duty along with interest and penalty invoking the extended period of limitation.

Analysis:
The appeal challenged the confirmation of a demand of duty amounting to ?3,99,687 along with interest and penalty, based on the extended period of limitation. The case originated from a search conducted at the premises of a company unrelated to the appellant. Subsequently, a show cause notice was issued to the unrelated company, alleging clandestine removal of MS Ingots without payment of central excise duty. The appellant was implicated as one of the buyers involved in the clandestine sale of the ingots. The investigation primarily relied on ledger accounts retrieved from a pen drive seized from the unrelated company's premises, which indicated that the appellant had received a specific quantity of ingots and further processed them into different products without proper documentation. The demand was confirmed by the authorities below.

The appellant contended that the show cause notice was based on assumptions and lacked substantive evidence linking them to the alleged clandestine activities. They argued that the department's reliance on third-party records without concrete corroborative evidence was unjustified. The appellant highlighted the absence of independent evidence such as weighment slips, transporter records, or payment details to support the allegations. Moreover, the appellant's name was not directly mentioned in the records, and the department failed to establish a clear connection between the appellant and the transactions in question. The appellant emphasized that the revenue presented no concrete evidence regarding the movement of goods or the identity of buyers for the processed products.

The tribunal emphasized the necessity of substantial evidence to support allegations of clandestine activities, especially when based on third-party records. Citing precedents, the tribunal noted that mere reliance on third-party documents without corroborative evidence was insufficient to sustain a demand. Previous cases where demands were set aside due to insufficient evidence were referenced to underscore the importance of concrete proof in such matters. In this specific case, the tribunal found that the demand was solely based on ledger accounts from the unrelated company's pen drive, lacking direct evidence linking the appellant to the alleged activities. The tribunal highlighted the department's failure to establish a clear connection between the appellant and the transactions mentioned in the records. Consequently, the tribunal allowed the appeal and set aside the impugned order.

In conclusion, the tribunal's decision emphasized the importance of substantial evidence in cases involving allegations of clandestine activities, cautioning against relying solely on third-party records without concrete corroborative proof. The judgment underscored the necessity of establishing a direct link between the accused party and the alleged transactions to uphold demands for duty, interest, and penalties.