2018 (7) TMI 255 - AT - Central Excise

Clandestine removal - MS Ingots - the entire case of the department is based upon the entries in the diary recovered from one Mr. S.K. Pansari (proprietor of M/s Monu Steels) and also on the statement of the said Mr. S.K. Pansari - absence of corroborative evidence - Held that - In the impugned order nowhere it has been discussed as to how the demand to duty is sustainable in the absence of any clinching evidence of clandestine manufacture and removal of the goods. The entire demand is based upon the records recovered from Sh. S.K. Pansari proprietor of M/s. Monu Steel. There is no evidence expect the said statement and private dairy entry of 3rd party i.e. of Sh. S.K. Pansari which contains the name of the appellant. The law as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence on any corroborative evidence, is well settled. Only on the basis of statement of third party no demand could be made. Since the entire case of the Revenue is based upon the entries made in the records of M/s. Monu Steel without there being any corroborative evidence, the demand is set aside - As a result the penalty imposed on Sh. Mahesh Agarwal, Director is also set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demand of Central Excise Duty for clandestine removal of MS ingots.
2. Reliability of evidence based on third-party diary entries.
3. Requirement of corroborative evidence for demand of duty.
4. Legal precedent on the use of third-party documents as evidence for clandestine removal.

Analysis:
1. The appeal challenged the confirmation of the demand for Central Excise Duty on M/s Suryoday Steel Plan Pvt Ltd for clandestine removal of 196.570 MTs of MS ingots, along with penalties imposed on Shri Mahesh Agarwal.
2. The appellant argued that the department's case heavily relied on diary entries and statements of a third party without sufficient corroborative evidence. The appellant denied the clearance of MS ingots through the commission agent mentioned in the entries.
3. The appellant contended that the department failed to provide any additional evidence to support the movement of goods or identify buyers, emphasizing the lack of inquiry into potential customers who might have purchased the goods allegedly sold clandestinely.
4. Legal precedent was cited, highlighting that findings of clandestine removal cannot be upheld solely based on third-party documents without substantial evidence of clandestine manufacture and removal of goods. Previous tribunal decisions were referenced to support the argument that demand based solely on diary entries without corroborative evidence is not sustainable.
5. The tribunal ultimately allowed the appeals, setting aside the impugned order and penalties, emphasizing the lack of corroborative evidence and reliance on third-party records without additional proof. Several similar cases were cited where demands were set aside due to insufficient evidence beyond third-party diary entries.