2019 (6) TMI 500 - AT - Central Excise

Clandestine Removal - demand based on consumption of electricity - no evidence to prove clandestine activity - HELD THAT - The Order-in-Original is passed upon mere presumption and possibilities and nothing have been proved at all by the Department as specially unaccounted for manufacturing of M.S. Ingot and clandestine removal thereof. The inference of CRC on the basis of loose sheets and private records is perverse as the entries made in the loose sheet and private record, without proper verification do not construed the legal admissible evidence. Unless there is clinging evidence of the nature of purchase of raw materials, use of electricity, sale of final products and mode of flow back of funds etc. Demands cannot be confirmed solely on the basis of presumption and assumption. Clandestine removal is the serious charge against the manufacturer which is required to be discharged by the Revenue by production of sufficient and tangible evidence - In the instant case, the consumption of the electricity was examined by the Department who adopted the shortcut method by raising the demand and levied the penalties. The statement of buyers and transporters are based on memory alone and their statements were not supported by any documentary evidence or any proof. When there was no extra consumption of electricity, purchase of raw materials etc. then manufacturing of extra goods is not possible. No purchase of raw materials outside the paper books have proved. There is no sufficient materials of records to establish clandestine manufacture and clearance - demand set aside - appeal allowed - decided in favor of appellant.

Issues involved:
1. Confirmation of demand along with interest and penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944.
2. Allegations of unaccounted manufacturing of M.S. Ingot and clandestine removal.
3. Consideration of private records and documents as evidence.
4. Requirement of sufficient evidence for proving clandestine removal.
5. Examination of statements and evidence by the Adjudicating Authority.
6. Burden of proof on Revenue for establishing clandestine manufacture and clearance.

Detailed Analysis:
Issue 1: The Adjudicating Authority confirmed the demand along with interest and imposed penalties under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. The appellants challenged this decision before the Tribunal, arguing that the order did not address all the issues raised in their reply to the Show Cause Notice. They specifically pointed out discrepancies in the calculation of production and clearance figures, contending that the entries in the private register seized by the Department were improper and incorrect, leading to absurd results. The Tribunal observed that the Order-in-Original was based on presumption and possibilities without concrete proof, ultimately setting aside the confirmation of demand and penalties imposed.

Issue 2: The case involved allegations of unaccounted manufacturing of M.S. Ingot and clandestine removal. The Tribunal noted that there was no substantial evidence supporting these charges. It emphasized the need for tangible proof, such as records of raw material purchases, electricity consumption, and sales transactions, to establish clandestine activities. The Tribunal found that the Department's conclusions were based on presumption and assumption rather than concrete evidence, leading to the dismissal of the charges of clandestine manufacture and clearance.

Issue 3: The Tribunal addressed the admissibility of private records and documents as evidence. It highlighted that entries in private records must be verified and supported by proper evidence to be considered legally admissible. In this case, the Tribunal found that loose sheets and private records without proper verification did not constitute valid evidence to support the allegations of clandestine activities.

Issue 4: The Tribunal emphasized the burden of proof on the Revenue to establish clandestine manufacture and clearance. It stated that mere assumptions and presumptions were insufficient to confirm demands and impose penalties. The Tribunal stressed the importance of concrete evidence, such as documentation of raw material procurement and production processes, to support allegations of clandestine activities.

Issue 5: The Tribunal critiqued the Department's reliance on statements from buyers and transporters based solely on memory without supporting documentary evidence. It emphasized the necessity of examining the authors of documents and statements to ensure the credibility and reliability of the evidence presented. The Tribunal underscored the importance of thorough examination and verification of evidence by the Adjudicating Authority to support any allegations made.

Issue 6: In conclusion, the Tribunal ruled in favor of the appellants, setting aside the confirmation of demand and penalties imposed under Rule 25 of the Central Excise Rules, 2002, and Section 11AC of the Central Excise Act. The Tribunal highlighted the lack of sufficient evidence to establish clandestine manufacture and clearance, emphasizing the need for concrete proof and proper verification of records to support such serious allegations.

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