2018 (7) TMI 1189 - AT - Central Excise

Clandestine Removal - unaccounted receipt of raw material and unaccounted clearance of final products - demand on the basis of third-party records and the statement of the third-party - Held that - In spite of interrogation of the responsible persons of the appellant company, there is neither any admission on their part nor Revenue have brought any corroborative evidence in support of this allegation. It is established principle that suspicion howsoever strong cannot take place of evidence, particularly in the case of clandestine removal. Demand cannot be confirmed based on presumptions and assumptions as it is a serious charge required to be proved by Revenue by sufficient evidence. Mere statement of buyers based on their memories was insufficient without support of corroborative evidence. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether excise duty was rightly demanded based on third-party records.

Analysis:
The judgment revolves around the issue of excise duty demand based on third-party records. The case involved a manufacturer of MS Ingots, Runners & Risers, who was alleged to have suppressed the actual quantity of ingots received and cleared. The excise duty demand was made after a search operation at the factory premises of related entities revealed unaccounted raw material receipts and clearances. The appellant was accused of being involved in the suppression of production and clearance of final products, leading to duty evasion. The appellate tribunal analyzed the evidence, including private records and statements, to determine the validity of the excise duty demand.

The tribunal noted that the Revenue's case relied heavily on third-party records and statements. Despite interrogations and investigations, no admission was obtained from the responsible persons of the appellant company. The tribunal emphasized that mere suspicion cannot replace concrete evidence, especially in cases of clandestine removal. Citing a precedent from the Hon'ble Allahabad High Court, the tribunal highlighted the necessity of clinching evidence in cases of clandestine removal, including proof of raw material purchase, electricity use, sale of products, transportation, payment, and realization of sale proceeds. The tribunal emphasized that demands cannot be confirmed based on presumptions and assumptions, requiring the Revenue to provide sufficient evidence to prove serious charges.

Ultimately, the tribunal allowed the appeals, setting aside the impugned order. The appellants were granted consequential benefits in accordance with the law. The judgment underscores the importance of concrete evidence and the burden of proof on the Revenue in cases involving excise duty demands based on third-party records.