2018 (8) TMI 471 - AT - Central Excise

Clandestine manufacture and removal - It is the case of the appellant assessee that the entries in the Jabeda Khata are not in respect of the plywood manufactured by them but represents the trading activities undertaken by the appellant assessee - Held that - The appellant assessee is a SSI unit having its factory at Bogram, P.S.-Karnajor, in the District of Uttar Dinajpur. The appellant manufactures commercial plywood out of veneer purchased from the market. They do not have any plant for manufacture of veneer. They are also trading the commercial plywood. The appellant availed the benefit of the Notification as granted to the Small Scale Unit up to the clearance value of ₹ 30 lakhs as was available during the period under consideration and after crossing the said limit the appellant had been paying duty on a concessional rate as envisaged in the Notification. It is well settled that the charge of clandestine manufacture of dutiable goods and removal thereof, without discharging the duty by the assessee, cannot be established on assumptions and presumptions. Such charge has to be based on complete and tangible evidence. The adjudicating authority have not brought forth the corroborative evidence on record to prove purchase of raw materials, manufacture of goods, consumption of excess power, payment of additional wages and sale of the final product. The department satisfied itself with the entries in the seized records and statements. There should have been some corroborative evidence. Appeal allowed - decided in favor of appellant.

Issues involved:
1. Undervaluation and clandestine manufacture and removal of commercial plywood based on entries in "Jabeda Khata."
2. Allegation of undervaluation and clandestine activities due to lack of access to Jabeda Khata.
3. Confirmation of demand, penalty imposition, and interest under Central Excise Act, 1944.
4. Tribunal remand directing supply of Jabeda Khata and other documents.
5. Jurisdiction issue regarding adjudication authority.
6. Compliance with principles of natural justice.
7. Dispute period from 1995-96 to 1997-98.
8. Allegation of clandestine activities without concrete evidence.
9. Lack of corroborative evidence for clandestine manufacture and removal.
10. Tribunal's decision setting aside duty demand, penalty, and interest.

Detailed Analysis:
1. The case involved allegations of undervaluation and clandestine manufacture and removal of commercial plywood based on entries in "Jabeda Khata." The appellant claimed that the entries did not pertain to their plywood manufacturing but to trading activities. The Tribunal initially remanded the matter for the supply of Jabeda Khata and other documents to the appellant for clarification.

2. The jurisdiction issue arose as the Commissioner passing the adjudication order was holding additional charge of the Siliguri Commissionerate. The appellant argued a violation of natural justice principles and non-compliance with the Tribunal's remand directions. The Revenue contended that the goods in question were manufactured by the appellant and cleared without duty payment, refuting the appellant's claim of trading activities without evidence.

3. The Tribunal found discrepancies in the adjudication process, including the lack of thorough inquiry, failure to examine relevant parties, and absence of concrete evidence to support the allegations of clandestine activities. The appellant's assertions regarding the source of raw materials and lack of duty payment evidence were considered. The Tribunal emphasized the necessity of tangible evidence to establish clandestine production and removal, setting aside the duty demand, penalty, and interest imposed in the impugned order.

4. The Tribunal's decision highlighted the importance of corroborative evidence, citing legal precedents that demand for duty cannot rely on assumptions and presumptions alone. The lack of concrete evidence regarding raw material purchase, manufacturing process, and sale of goods led to the setting aside of duty demand, penalty, and interest against the appellant firm. The appeal was allowed with consequential relief granted.

5. The judgment emphasized the need for concrete evidence to establish clandestine activities and reiterated the principles of natural justice and jurisdictional clarity in adjudication processes under the Central Excise Act, 1944.

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