2018 (10) TMI 967 - AT - Central Excise

Clandestine manufacture and removal - tread rubber - whether the Department has reasonably discharged its burden of proof on the allegation made by them on the appellants that they have clandestinely manufactured and cleared tread rubber without payment of duty? Held that - The allegation of the department is that both the appellant companies, i.e. M/s. TRPL & M/s. TTRPL, have resorted to clandestine removals, the duty was confirmed jointly on both the companies. There is no mention of the amount of duty/penalty recoverable from each of the appellant companies although the department does not dispute the independent existence of both the appellant companies. It was submitted by Ld. AR that most of the finished goods came into existence at the premises of M/s. TTRPL but majority of the clandestine clearances were effected using the invoices of M/s. TRPL. However, demand has not been confirmed against any particular company, though the clearances were sought to be clubbed - also, Department does not dispute the distinct identity of both M/s TRPL & M/s TTRPL. In this case it is a recognized fact that both units are existing and paying duty separately. In such a situation, the legality of demand of duty from both units, becomes questionable. The confirmation of duty on both the units not only leads to inference that both the units exist differently but would also pose difficulties in execution of the order. It is not clear as to how much amount is to be recovered from which unit. Therefore, the Department needs to have a clarity with reference to the demand i.e. the so-called demand needs to be confirmed against a particular firm. In the absence of the same, this Bench is handicapped to conclude on the merits of the case. In the interest of justice, matter should go back to the Ld. Commissioner for arriving at a categorical conclusion as to on whom the demand needs to be confirmed, properly weighing the evidence available on record - appeal allowed by way of remand.

Summary

Issues Involved:
1. Alleged clandestine removal of tread rubber without duty payment.
2. Burden of proof on the Department regarding the allegations.
3. Joint confirmation of duty on multiple companies without specifying individual liabilities.

Analysis:

Issue 1: Alleged Clandestine Removal
The Department alleged that the appellants engaged in clandestine activities by diverting Carbon Black and not accounting for natural rubber in the production of tread rubber. Various pieces of evidence, such as computer printouts, bar code slips, and dealer statements, were used to support the claim of clandestine removal.

Issue 2: Burden of Proof
The appellants argued that the evidence presented by the Department was inconclusive and lacked corroboration. They challenged the validity of the evidence related to Carbon Black diversion, natural rubber procurement, computer printouts, and alleged benami accounts. The appellants emphasized the need for concrete proof of all raw material usage, electricity consumption, transportation, and sale proceeds for a charge as serious as clandestine removal.

Issue 3: Joint Confirmation of Duty
The Tribunal noted that while the Department accused both appellant companies of clandestine activities, the duty demand was jointly confirmed without specifying individual liabilities. The appellants contended that each company had paid duty separately in the past, indicating their independent existence. Citing legal precedents, the Tribunal highlighted the necessity of clarity in confirming demands against specific entities to ensure proper execution and avoid ambiguity in recovery proceedings.

The Tribunal, after considering the arguments presented, concluded that due to the lack of clarity in specifying individual liabilities and the potential difficulties in execution, the matter should be remanded to the Commissioner for a definitive determination on whom the duty demand should be confirmed. The decision to remand the case was made in the interest of justice to ensure a fair and precise resolution.

In summary, the Tribunal's judgment focused on the burden of proof, the necessity of concrete evidence in serious allegations, and the importance of clarity in confirming duty demands against specific entities to facilitate proper execution.