2019 (1) TMI 966 - AT - Central Excise

Clandestine manufacture and removal - 28297.0 MT of M.S. Ingots - demand based on excess electricity consumption including the duty involved in alleged clandestine removal of MS ingots for the period w.e.f. 2005-06 to 2010-2011 - Held that - The initial demand of ₹ 8,21,08,631/- has already been dropped to the major extent of ₹ 8,00,40,529/- qua excess consumption of electricity, relying upon the decision of Hon ble Apex Court in the case of RA Castings Pvt. Ltd. 2011 (1) TMI 1302 - SUPREME COURT OF INDIA . We do not find any infirmity in the order to that extent. The similar issue is no more res-integra as stand already been decided in favour of assessee. Therefore, to that extent, the order under challenge is upheld. Clandestine removal - entire case of the Revenue is based upon the records recovered from M/s Monu Steels about removal of finished goods to various customers and about details of procurement of raw-material and is based upon the statement of the representative of M/s Monu Steels - Held that - Department has failed to obtain any document, as direct evidence, to corroborate the said recovered record. The same also finds mention in the order under challenge. Further, the Revenue has not made any other enquiries and has solely relied upon the entries made in the record of M/s Monu Steels - The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged suppression of production and clandestine removal of MS ingots.
2. Confirmation of Central Excise duty demand.
3. Imposition of penalty on the Director.
4. Use of third-party records as evidence for clandestine removal.

Analysis:
1. The judgment pertains to two appeals arising from the same adjudication involving allegations of suppression of production and clandestine removal of MS ingots. The Department alleged that the appellant, a broker/commission agent dealing with iron and steel products, had evaded duty by clandestinely removing a significant quantity of MS ingots. The impugned show cause notice proposed a substantial demand based on excess electricity consumption and alleged clandestine removal for a specific period. The original adjudicating authority confirmed a portion of the demand, leading to the filing of the present appeals.

2. The order under challenge dropped a major portion of the demand related to excess electricity consumption but confirmed a specific amount as Central Excise duty demand for clandestine manufacture and clearance of MS ingots. Additionally, a penalty was imposed on the Director of the company. The appellant contested the confirmation of the demand, highlighting the lack of corroborative evidence supporting the allegations. The Department, however, supported the adjudicating authority's decision, emphasizing the reasoned order based on documentary evidence.

3. The appellate tribunal, after hearing both parties and reviewing the record, upheld the decision to drop the major portion of the demand related to excess electricity consumption. However, regarding the confirmed demand for Central Excise duty, the tribunal found the Revenue's case solely reliant on records recovered from another entity, M/s. Monu Steels, without substantial corroborative evidence. Citing established legal precedents, including decisions by the Allahabad High Court and various Tribunals, the tribunal emphasized the necessity of clinching evidence for allegations of clandestine removal. Consequently, the tribunal set aside the confirmed demand and allowed the appeals.

4. The judgment underscores the legal principle that findings of clandestine removal cannot be upheld based solely on third-party documents without substantial corroborative evidence. By applying this principle to the present case, the tribunal concluded that the Revenue's case lacked the necessary evidence to support the allegations of clandestine removal, leading to the decision to set aside the demand.