2019 (5) TMI 710 - AT - Central Excise

Clandestine removal - M.S. Billets - entire case of the Revenue is based upon the entries made on the loose slips recovered during the course of visit of the officers read with the statement of the authorized Signatory, Shri Shankey Goyal and the shortages detected in the stock of final products. HELD THAT - The statement of the authorized signatory stands retracted subsequently and has also not been tested upon the touch stone of the cross examination and examination-in-chief. The Hon ble Punjab Haryana High Court in the case of Jindal Drugs Pvt. Ltd. Vs. Union of India 2016 (6) TMI 956 - PUNJAB HARYANA HIGH COURT has held that the statement, which has not been cross-examined and examination in-chief, has to be kept out of consideration. It is well settled law that the allegation of clandestine removal is required to be uphold on the basis of the clinching evidence requiring proof of purchase of various raw materials, use of extra electricity, sale of final products, clandestine removal, transportation, payment , realization of sale proceeds, mode and flow back of funds - Inasmuch as in the present case, the Revenue s entire case is solely based upon the scribbling made in the recovered loose papers, without there being any evidence of actual manufacture and removal of the final products, there are no reasons to uphold the findings of the clandestine removal. Appeal allowed - decided in favor of appellant.

Summary

Issues: Allegations of clandestine removal of goods, duty liability, retracted statement by authorized signatory, reliance on loose papers for evidence, shortage of final products, imposition of penalty on authorized signatory.

In this case, the appellant, a manufacturing company, was accused of clandestine removal of goods based on entries in loose papers found during a factory visit. The central excise officers suspected that the company had removed a significant quantity of M.S. Billets without proper documentation and payment of duty. Additionally, discrepancies in the stock of final products further raised suspicions of clandestine activities. The authorized signatory initially admitted duty liability but later retracted the statement. The Revenue initiated proceedings against the appellant, leading to the confirmation of demands, interest, and penalties by the Original Adjudicating Authority, including a penalty on the authorized signatory under Rule 26(1) of Central Excise Rules, 2002.

Upon appeal, the Tribunal analyzed the case, noting that the Revenue's entire argument relied on the entries in the recovered loose papers and the retracted statement of the authorized signatory. However, the statement was not cross-examined, as per legal precedent, rendering it unreliable. The Tribunal emphasized the necessity of concrete evidence to prove clandestine removal, such as proof of raw material purchase, production process, and sale of final products. Referring to legal judgments, the Tribunal highlighted that mere shortages in final products were insufficient to establish clandestine removal without supporting evidence. The Tribunal cited precedents from various High Courts and Tribunals to emphasize the importance of corroborative evidence in such cases.

Ultimately, the Tribunal found the Revenue's case lacking substantial evidence of actual manufacturing and removal of goods, solely relying on scribblings in loose papers. As a result, the Tribunal set aside the impugned order, allowing both appeals in favor of the appellants, thereby overturning the demands, interest, and penalties imposed by the lower authorities.