2019 (1) TMI 245 - AT - Central Excise

Clandestine removal - demand has been confirmed on the basis of entries in spiral note book recovered from the residential premises of Shri Vijay Kumar Goyal and other loose documents (slips) recovered from the premises of Shri Sanjay Goyal - retraction of statement after 2 years - Held that - There are names of suppliers & buyers mentioned in the said records, however, during the course of investigation of the named buyers by the Revenue, the said buyers have denied to have purchased any goods from the appellant. The Revenue has not been able to identify any buyer of the said goods - also, no investigation has been conducted as regards supplier of raw materials to the appellant. Hon ble Allahabad in the case of Continental Cement Company Vs. UOI 2014 (9) TMI 243 - ALLAHABAD HIGH COURT has laid down various parameters to establish clandestine removal of goods. However, in the present case, no such evidence has come on record. Revenue is mainly relying on the statement of various persons to conclude that clandestine removal of goods have been established and nothing more is required to prove. It is well settled law that only on the basis of statements, huge demand cannot be confirmed, especially when statements have been retracted and no cross-examination has been given of the witnesses. The appellant have led cogent evidence being bill for acquisition of furnace in recent, furnace past contract given for its installation, etc. Such evidence was not found untrue. Further as per the panchnama, the furnace was under installation. No supporting raw material, moulds, labour etc was found, essential for manufacture of ingots. No ascertainment of furnace capacity by an expert was done. In the inspection by officers of Municipal Corporation of Delhi, in the near vicinity of date of panchnama, no manufacturing activity was found. The Calculation of purchase of copper scrap have also been included. The whole case of Revenue is based on assumption and presumption on unreliable evidences - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Liability of M/s. Rama Industries to pay central excise duty, interest, and penalty for alleged clandestine removal of goods.
2. Liability of other appellants under Rule 26 of the Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Liability of M/s. Rama Industries for Central Excise Duty:
The primary issue in the appeals was whether M/s. Rama Industries was liable to pay central excise duty, along with interest and penalty, for allegedly removing goods clandestinely. The facts revealed that a search was conducted on various premises associated with the appellants, where documents, electronic devices, and statements were recorded. The department issued a show cause notice proposing a duty of ?6,09,96,299/- based on these findings. However, the appellants contended that no manufacturing activity was taking place, as evidenced by the installation status of the furnace, the attendance register, and the DVR recording. They argued that the premises were agricultural land used as a godown, and no moulds or sufficient raw materials were found to support the allegations of clandestine manufacturing. The Tribunal found that the demand was based on assumptions and unreliable evidence, noting the lack of corroborative evidence such as unaccounted cash, seized goods, or identified buyers. The Tribunal emphasized that statements alone, especially when retracted and without cross-examination, could not substantiate such a significant demand. Consequently, the Tribunal set aside the impugned order and allowed the appeals, providing consequential relief to the appellants.

2. Liability of Other Appellants under Rule 26 of the Central Excise Rules, 2002:
The show cause notice also proposed penalties under Rule 26 on Shri Vijay Goyal and Shri Dinesh Goyal. The appellants argued that the statements of various individuals, including those of Shri Vijay Goyal and Shri Dinesh Kumar, were not reliable as they were not corroborated by material evidence and were extracted under duress. The Tribunal found that the statements were not supported by any substantive evidence and that the truth and veracity of the statements had not been tested through cross-examination. Additionally, the Tribunal noted that the department failed to identify any buyers or suppliers involved in the alleged transactions. Given the lack of corroborative evidence and the reliance on retracted statements, the Tribunal concluded that the penalties imposed under Rule 26 were not sustainable and set aside the penalties imposed on the other appellants.

Conclusion:
The Tribunal concluded that the entire case of the Revenue was based on assumptions and presumptions without reliable evidence. The impugned order was set aside, and the appeals were allowed with consequential relief to the appellants. The Tribunal emphasized the necessity of corroborative evidence and the unreliability of statements that were retracted and not subjected to cross-examination.