2018 (12) TMI 238 - AT - Central Excise

Clandestine removal - parallel invoices - Revenue entertained a view that the appellant was indulging in clandestine activities and the scribblings made in the loose paper related to clearances of their finished product without payment of duty - Held that - We really fail to understand that if the names of the parties, who according to the Revenue are recipients of the goods, were present in these loose sheets, why the buyers were not approached and their statements recorded. Similarly the number of tempos or trucks was available in the said sheets but no further investigations stand made by the Revenue from the said vehicle owners, for the reasons best known to them. Not only that the Revenue has not made any efforts to identify the scribe of these documents, no evidence of procurement of raw material and conversion of the same into final product in the assessee s factory, and clearances of the same or identification of the buyers has been established by the Revenue. The law on the clandestine manufacture is well established. Admittedly the burden of proving clandestine removal is on the Revenue and is required to be discharged by production of positive and affirmative evidences - It is well established that the charge of clandestine removal is in the nature of quasi criminal adjudication, which also results in criminal liabilities by way of prosecution of the concerned persons. As such the same requires stronger prove by production of positive evidence and cannot be made on the basis of some scribblings in the loose papers recovered from the factory. In the present case, the Revenue has not investigated the matter further and has based his entire case on the basis of entries in loose papers only, the scribe of which is also not identified. Further reference to the so called inculpatory statement of Shri Harmeet Singh who is a co-appellant, even if considered to be confessional in nature, cannot be made the sole basis for arriving at the finding of clandestine removal unless the same is corroborated by independent evidences. The deponent of statement, Shri Harmeet Singh have assailed the free and correct nature of the same by referring to the fact that they were made to deposit certain amounts at the stage of investigations itself to establish that the appellant was under pressure from the visiting officers and the statement cannot be considered to be a free and correct statement - there is no evidence, corroborating the Revenue s stand - there are no merits in the impugned order. The part of the demand is based upon the nine parallel invoices recovered and seized by the officers from the appellant s factory. Shri Sanjeev Kumar as also Shri Harmeet Singh have accepted the fact that they cleared their final product under the cover of the said nine invoices, without payment of duty - the duty in respect of the said nine invoices is required to be confirmed against them along with confirmation of interest and imposition of penalty to that extent in terms of the provisions of Section 11 AC. Penalty on Shri Harmeet Singh - Held that - Inasmuch as the main demand against the manufacturing unit has been set aside, there is no justification in imposing penalty on him, especially, when no specific role stands attributed to him so as to show his involvement - penalty set aside. Appeal disposed off.

Summary

Issues:
Allegations of clandestine activities and duty evasion based on recovered documents and statements.

Analysis:
The case involved allegations of clandestine activities and duty evasion against the appellants based on recovered documents and statements. The Revenue claimed that the appellants had clandestinely cleared a significant amount of finished goods without paying duty, supported by two charts prepared by officers. The show cause notice proposed a confirmed duty amount along with interest and penalties. The Commissioner confirmed the demand, interest, and penalties, leading to the present appeals.

Upon hearing both sides and reviewing the impugned order, the Tribunal found the Revenue's case solely relied on rough entries in loose papers recovered from the factory. The appellants argued that these entries could not be the basis for proving clandestine removal without corroborative evidence. The statements of key individuals were not incriminating, and discrepancies were found in their testimonies. The Revenue failed to contact buyers or investigate further, despite having buyer names and vehicle details from the recovered documents.

The Tribunal emphasized that the burden of proving clandestine activities rested on the Revenue, requiring positive and affirmative evidence. Legal precedents highlighted the need for concrete evidence in such cases, not mere conjectures. The Tribunal noted the quasi-criminal nature of such charges, necessitating strong evidence. In this case, the Revenue's case lacked independent corroboration and failed to establish clandestine removal conclusively.

While dismissing the duty demand based on loose papers, the Tribunal upheld part of the demand related to nine parallel invoices recovered from the factory. The appellants admitted using these invoices for duty evasion, shifting the burden of proof to them. As they failed to demonstrate these invoices were part of statutory records, duty confirmation, interest, and penalties were imposed. However, the penalty on one appellant was set aside due to lack of specific involvement.

Ultimately, the Tribunal set aside the demand based on loose papers but confirmed duty related to the recovered invoices. The penalty on one appellant was revoked, and the appeals were disposed of accordingly.