2020 (7) TMI 53 - AT - Central Excise

Clandestine removal - sponge iron - shortage in stock of coal and sponge iron - no corroborative evidences - HELD THAT - From the show cause notice, it is observed that existence of weighbridge is admittedly within the factory premises. The weighbridge slips are considered as one of the important documents by the adjudicating authorities below providing the alleged clandestine removal. Once the weighbridge exists within the factory premises, the factum of clearance of goods from said weighbridge does not at all arise. This observation is sufficient to hold that weighbridge slips cannot be the evidence for proving that the goods were cleared from the appellant s factory clandestinely. The weighbridge being within the factory premises, the weighment of any commodity or any entry in outgoing register from the said weighbridge cannot reflect clearance at all. The shortage is alleged on the basis of an estimate weighment of sponge iron the estimation cannot take place of evidence. Specially, when there is no investigation as to where from the noticed excess inputs were sourced so as to manage such excess clearances. No investigation as regard electricity excess usage. No third party investigation as regards transporters buyers etc. Above all, no attempt to track any money trail as alleged. Law has been settled that where the allegation of duty. To prove the allegation of clandestine sale, further corroborative evidences are also required. Apparently, there is no investigation conducted by the Department qua any of said aspects. Alleged admission of Shri Devi Lal Sahu - HELD THAT - The statement contains only a declaration to comply with the law. It cannot be taken as an admission of any clandestine removal. Question of the said statement to be the corroboration of the alleged guilt does not at all arise - in the absence of direct admission of clandestine removal the mere fact of the shortage found cannot sustain the charge of clandestine manufacture and removal. Accordingly the confirmation of demand is merely presumptive hence, not sustainable. The adjudicating authority below has based the decision on assumptions and surmises and in total ignorance of the documents and submissions produced/made by the appellant. Those documents and the facts submitted are sufficient to falsify the allegations - appeal allowed - decided in favor of appellant.

Summary

Issues:
Alleged clandestine removal of goods, confirmation of duty demand, reliance on weighbridge slips, shortage of raw materials, reliance on employee's statement, sufficiency of evidence, burden of proof, corroborative evidence requirement, admission of guilt, payment of duty with protest.

Analysis:
The appellant contested the Order-in-Original passed by the Commissioner (Appeals) regarding the alleged clandestine removal of goods and duty demand. The appellant argued that discrepancies in records and shortages were not admitted by their employee, challenging the basis of the demand. They contended that the weighbridge slips were irrelevant as goods were not cleared from the factory. The appellant also highlighted that shortages were due to legitimate reasons like reversal of input credit and proper declarations in their returns. They emphasized the lack of concrete evidence linking them to the alleged activities and cited relevant case laws to support their stance.

The Department rebutted the appellant's arguments by asserting that the inputs were not used in the final product, indicating clandestine removal. They relied on the appellant's OSD's admission of clandestine removal, stating that admissions do not require further proof. The Department cited legal precedents to support their position and urged dismissal of the appeal.

Upon review, the Member observed that the raid collected various documents and physical verifications were conducted, leading to allegations of clandestine removal. However, the reliance on weighbridge slips within the factory premises was deemed irrelevant for proving clandestine removal. The Member noted the lack of investigation into various aspects like excess production, raw material purchases, and fund flow, crucial for proving clandestine activities. The Member highlighted legal precedents emphasizing the need for corroborative evidence in such cases.

Regarding the employee's statement, the Member determined it as a mere declaration of compliance with the law, not an admission of guilt. The Member cited case laws to support the view that shortages alone cannot sustain charges of clandestine activities without direct admission. The Member also referenced cases where shortages determined on estimation basis were not sufficient for proving clandestine removal. The Member concluded that the adjudicating authority's decision was based on assumptions and ignorance of appellant's submissions, leading to the order being set aside.

In light of the above observations, the Member held the order unsustainable and allowed the appeal, emphasizing the lack of concrete evidence and reliance on presumptions by the adjudicating authority.