2021 (4) TMI 382 - AT - Central Excise

Clandestine procurement and removal - MS ingots - TMT Bars flats challans etc. - shoratge of goods - M.T. M.S. Ingots - MT TMT Bar - MT Sponge Iron - challenge mainly based on reliance upon third party evidence - evidentiary value of the third party evidence - HELD THAT - There is no other evidence or document in the form of stock verification of the raw-material of the appellant and the material supplied to M/s. PIL nor any evidence about usage of any transportation by the appellants for transporting the alleged quantity of raw-material to M/s.PIL. In absence thereof the documents recovered from M/s.PIL cannot be held against the appellant. It is well settled law that there has to be some concrete evidence which would show clandestine manufacture of goods as was reiterated by Tribunal Delhi in the case of C.C.E. S.T. -RAIPUR VERSUS P.D. INDUSTRIES PVT. LTD. 2015 (11) TMI 455 - CESTAT NEW DELHI . The order confirming the recovery has no legal basis to sustain - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged clandestine procurement of raw materials and clearance of goods.
2. Recovery of Central Excise duty from the manufacturer.
3. Appeal against the Order-in-Appeal allowing the recovery.

Analysis:
1. The case involved allegations of clandestine procurement of raw materials and clearance of goods by a manufacturer of MS ingots. Central Excise Officers conducted an investigation at the premises of the alleged party, where a shortage of various materials was noticed. Incriminating documents were recovered, and statements were recorded. The investigation revealed involvement of suppliers and customers in evasion of Central Excise Duty. The manufacturer was accused of supplying unaccounted raw materials, leading to a show cause notice for recovery of duty, interest, and penalties.

2. The Assistant Commissioner initially dropped the proceedings against the manufacturer, but the Department appealed to the Commissioner (Appeals) who allowed the recovery. The manufacturer then appealed to the Appellate Tribunal challenging the reliance on third-party evidence, as no direct evidence was found during investigations at their premises. The Department argued that the recovered documents from the alleged party proved the involvement of the manufacturer in supplying unaccounted raw materials.

3. The Tribunal, after considering the arguments, referred to established case law regarding the evidentiary value of third-party records in cases of clandestine removal. It was emphasized that findings of clandestine activities cannot be upheld solely based on third-party documents without concrete evidence. The Tribunal found no corroborative evidence against the manufacturer, such as stock verification or transportation records. Relying on precedents, the Tribunal set aside the order confirming the recovery, stating that there was no legal basis to sustain it. Consequently, the appeal was allowed, and the impugned order was overturned.