2019 (4) TMI 530 - AT - Central Excise

Clandestine removal - manufacturing activity or not - Revenue pointed out that Appellant declared himself as manufacturer in tender documents - confiscation of goods seized at Wazirabad premises - Held that - Once the issue that the premises was not in possession of Appellant and that the Appellant did not carry out any manufacturing at the said premises has conclusively been decided and accepted by Department, holding the Appellant guilty of clandestine manufacturing and clearing the consignments without payment of duty from Wazirabad premises is ex-facie unsustainable in law. Thus on this short ground alone, Appellant s Appeal succeeds. During the course of investigation itself, Appellant had adduced the evidence of procurement of impugned bed nets from job workers in Cuttack and East Midnapore and transportation of goods from there to Delhi. Further, on investigation, it was found that the job workers as well as transporters in their respective statements admitted to have issued the documents i.e bilty/letters evidencing transportation / manufacturing but could not adduce the supporting documents. Learned Commissioner in the impugned order has rejected those documents as afterthought and confirmed the demand holding that as the Appellant in the tender documents declared himself as manufacturer and hence he cannot be allowed to turn around to say that the goods were procured from job workers. The confirmation of demand solely on the basis of fact that Appellant declared himself as manufacturer in tender documents cannot be sustained in law. The demand confirmed on the basis of conjectures and surmises is unsustainable in law - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Legitimacy of the demand for Central Excise duty.
2. Allegation of clandestine manufacturing and clearance of goods.
3. Validity of the evidence supporting the manufacturing activities.
4. Impact of the previous Tribunal’s findings on the current proceedings.
5. Rejection of documents provided by the appellant.
6. Applicability of legal precedents to the appellant’s case.

Detailed Analysis:

1. Legitimacy of the Demand for Central Excise Duty:
The impugned Order-in-Original confirmed a demand of ?94,65,315/- under Section 11A(1) of the Central Excise Act, 1944, invoking the extended period along with interest and imposed an equal penalty under Section 11AC of the Act. This demand was based on the appellant’s declaration as a manufacturer in tender documents and the presumption that manufacturing activities were carried out at the Wazirabad premises.

2. Allegation of Clandestine Manufacturing and Clearance of Goods:
The Department alleged that the appellant willfully suppressed facts by not informing the Central Excise Department about manufacturing activities at the Wazirabad premises and cleared goods without payment of duty. However, the Tribunal found that the appellant did not carry out any manufacturing activities at the said premises, as previously concluded in Final Order No. 54022/2015 dated 21.08.2015, which was accepted by the Department.

3. Validity of the Evidence Supporting the Manufacturing Activities:
The Tribunal observed that there was no evidence of raw material procurement, power consumption, payment of wages, or transportation of manufactured goods. The Panchnama dated 10.09.2002 and letters from the property owners confirmed the absence of power connection and generator at the premises. The Department’s case was found to be based on presumptions and lacked concrete evidence.

4. Impact of the Previous Tribunal’s Findings on the Current Proceedings:
The Tribunal’s previous findings that the appellant did not possess the Wazirabad premises and did not carry out manufacturing activities there were accepted by the Department. Thus, the current demand based on the presumption of manufacturing at the said premises was deemed unsustainable.

5. Rejection of Documents Provided by the Appellant:
The appellant provided evidence of procurement from job workers and transportation of goods. The job workers and transporters admitted to issuing relevant documents but could not provide supporting documents. The Commissioner rejected these documents, considering them afterthoughts. However, the Tribunal found the appellant’s argument tenable, noting the absence of evidence for manufacturing activities at the Wazirabad premises.

6. Applicability of Legal Precedents to the Appellant’s Case:
The Tribunal referred to the judgments in Vasavi Synthetics Pvt. Ltd. vs. CCE Visakhapatnam and Arch Pharmalabs Ltd. vs. CCE, Hyderabad, which held that demand cannot be raised based on documents prepared for obtaining higher loans without corroborative evidence of actual manufacturing and clearance. The Tribunal found these precedents applicable, noting the lack of evidence for manufacturing activities by the appellant.

Conclusion:
The Tribunal concluded that the demand for Central Excise duty was based on conjectures and surmises, lacking concrete evidence of manufacturing activities by the appellant. The appeal was allowed, and the impugned order was set aside with consequential relief as per law.

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