2019 (12) TMI 13 - AT - Central Excise

Clandestine removal - job-work - contracts of fabrication of structures and erection of the same in various sites of builders - it is alleged that the appellants have manufactured excisable goods and cleared them without payment of duty - corroborative evidences or not - HELD THAT - It is abundantly clear from the work orders that the work has been of a composite nature and fabrication of large items has been done at the site. Therefore, it is not correct to allege that the entire amount received by the appellants as shown in the balance sheet pertains to the value of excisable goods alleged to have been manufactured. The allegation of clandestine manufacture and clearance is a very serious charge. The department was required to prove right from the procurement of raw material, use of raw material along with other inputs, deployment of labour, consumption of power, manufacture of final products, transportation of final products to the alleged destinations and financial flow there upon - None of the above parameters have been conclusively addressed by the Department. In fact, the appellant claimed and has demonstrated the figures from the balance sheet pertaining to the power consumption in the unit. No contra evidence has been adduced by the Department. There are force in the arguments of the appellants that the structures fabricated and erected by them are so huge that it would be neither feasible nor economical to transport them from their factory premises to the premises of the projects. In the case of projects undertaken at other places than Bangalore, it will be fallacious to assume that such structures are transported to far of places like New Delhi, Bellary, Baddi, etc. Similarly, no proof of deployment of labour and use of other raw material, etc., has been put forward. From the statement of Mr. Mohammed Yamin Khan, it is only evident that sometimes they fabricate smaller items in the factory. As discussed above, we find that for this reason, it cannot be said that they have manufactured the entire goods in their factory premises. Moreover, even if there is an oral evidence in the form of a statement, it requires to be corroborated by documentary evidence - there are no such evidence has been put forth. Under the circumstances, we find that the allegations of clandestine manufacture and removal do not sustain. Penalty - HELD THAT - When the duty liability is not sustained, consequentially, the penalties also do not sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegations of clandestine manufacture and clearance without payment of duty.
2. Composite nature of contracts undertaken by the appellants.
3. Lack of conclusive evidence provided by the Department to prove the allegations.
4. Statements made by the Director of the appellants regarding the manufacturing process.

Analysis:

Issue 1: Allegations of clandestine manufacture and clearance without payment of duty
The case involved M/s. Ambasy Contractors Pvt. Ltd., accused of manufacturing steel structures without paying Central Excise duty. The Department alleged that the appellants cleared excisable goods without duty payment. The Commissioner confirmed the duty amount along with penalties imposed on the company and the Director. The appellants challenged this decision through appeals.

Issue 2: Composite nature of contracts undertaken by the appellants
The appellants argued that they were primarily engaged in fabrication, erection, and fixing of steel structures at various sites as per contracts received from builders. They contended that the work orders clearly indicated composite contracts involving material, labor, and services. The appellants highlighted that the nature of their work was such that large structures could not have been manufactured in a small factory and transported to different sites. They emphasized that the Department failed to prove that the goods were actually manufactured in their factory.

Issue 3: Lack of conclusive evidence provided by the Department
The Department conducted investigations and alleged that the appellants manufactured excisable goods without maintaining proper records. However, the Tribunal noted that the Department did not provide conclusive evidence to support their allegations. The Department's failure to address various parameters from raw material procurement to transportation of final products weakened their case. The Tribunal found merit in the appellants' argument that the structures fabricated and erected by them were too large to be transported from their factory premises.

Issue 4: Statements made by the Director of the appellants regarding the manufacturing process
The Department cited statements from the Director of the appellants accepting some manufacturing in their factory. However, the Tribunal observed that the statements did not conclusively prove the allegations. The oral evidence provided required corroboration with documentary evidence, which was lacking. The Tribunal concluded that the allegations of clandestine manufacture and removal were not sustained due to insufficient evidence.

In conclusion, the Tribunal allowed both appeals, emphasizing the lack of concrete evidence supporting the Department's allegations of clandestine manufacture and clearance. The Tribunal highlighted the composite nature of the contracts undertaken by the appellants and the absence of proof regarding the actual manufacturing process. The penalties imposed were also deemed unsustainable due to the failure to establish duty liability.