2018 (7) TMI 1206 - AT - Central Excise

Clandestine Manufacture and removal - Revenue entertained a view that the three raw material manufacturers have supplied the LD film to the respondent, who have utilized the same for manufacture of their final product, without reflecting the same into statutory records - revenue s case is based upon the recovery of some loose slips from the 3rd party premises. Held that - It is well settled law that allegations and findings of clandestine removal are required to be based upon positive evidences produced by the revenue. There is admittedly no such evidence available on record which could show that there was unaccounted production and clearance of final products - The burden of proof to establish clandestine removal is on the revenue and is required to be discharged effectively. In the present case, apart from the confessional statement and the recovery of the loose slips from the premises of 3rd party, there is factually no other evidence to indicate any clandestine activity on the part of the respondents - demand cannot sustain. Appeal dismissed - decided against Revenue.

Summary

Issues involved:
Allegations of clandestine manufacture and clearance of goods without reflecting in statutory records, confirmation of duty demand, interest, and penalty imposition based on recovery of loose slips and statements, sufficiency of evidence to establish clandestine removal, burden of proof on revenue.

Analysis:
The case involved the revenue filing appeals against the order passed by the Commissioner, alleging clandestine manufacture and clearance of goods by the respondents without reflecting the same in statutory records. The revenue relied on the recovery of loose slips from third-party premises and statements recorded during the investigation. The revenue issued a show cause notice proposing duty confirmation of ?14,27,158, which led to the impugned order confirming the demand, interest, and penalty of the same amount.

Upon appeal, the Commissioner (Appeals) noted the lack of concrete evidence beyond the recovery of loose slips and statements to establish the removal of final products from the respondent's factory clandestinely. The Commissioner scrutinized the Managing Director's statement and found no admission of clandestine removal, setting aside the lower authority's order based on insufficient evidence.

The revenue reiterated their reasons in the appeal memo but failed to produce additional evidence reflecting clandestine activities. The case hinged on the recovery of loose slips, but the absence of positive evidence of unaccounted production and clearance of final products was noted. Legal precedents highlighted the requirement for the revenue to establish clandestine removal with corroborative evidence, placing the burden of proof on them effectively.

Ultimately, the Tribunal rejected both appeals by the revenue, citing the lack of substantial evidence beyond confessional statements and loose slip recovery to prove clandestine activities by the respondents. The judgment emphasized the necessity for concrete evidence to support allegations of clandestine removal, as mere suspicion or confessional statements without corroboration were deemed insufficient to establish liability.