2022 (1) TMI 1120 - AT - Central Excise

Clandestine manufacture and clearance - Formaldehyde - inputs received without payment of duty - issuing invoices to some traders without supplying goods to them - evasion of excise duty - corroborative evidences to prove clandestine manufacture or not - deamnd based on only assumptions and presumptions - HELD THAT - To manufacture such a huge quantity of the goods clandestinely, the appellant requires other inputs and electricity is to be consumed to manufacture such a huge quantity of the goods. From the records, it is not coming out whether the Revenue has made such effort to ascertain the facts from where the other raw materials were procured and how much is the electricity is consumed. Moreover, when it alleged that the appellant has sold the said clandestine manufactured goods, no statement of any buyer is brought on record to establish the fact that the appellant has cleared clandestinely manufacture goods without payment of duty. In the absence of any evidence on record, the charge of clandestinely manufactured clearance of the goods without payment of duty cannot be sustained. No cross examination of Shri. Ashok Aggarwal has been allowed to the appellant to ascertain the truth. No inculpatory statement of the appellant has been found on record to establish the fact that the appellant has received the goods on the basis of the Dharma-Kantas slips provided by the supplier of the goods - In the absence of any cogent evidence against the appellant, the charge of the clandestine manufacture and removal of the goods by the appellants is not sustainable, the same is on the basis of assumptions and presumptions. The proceedings against the appellants are not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of duty on account of clandestine manufacture and clearance of goods with penalties imposed.

Analysis:
The case involved allegations of clandestine manufacture and clearance of goods without payment of duty, based on information received regarding evasion of excise duty by certain firms engaged in manufacturing Formaldehyde. The firms were found to have clandestinely supplied Formaldehyde to various manufacturers without issuing invoices, with duty liability settled through invoices issued to some traders without actual supply. Weighment slips were recalled evidencing clandestine supply, with statements from involved parties confirming the evasion. A show cause notice was issued to the appellants, alleging purchase of Formaldehyde without bills and clandestine clearance of Plywood and Plyboard without accounting for central excise duty. A demand of ?2,22,13,272/- was proposed for recovery, leading to confirmation of duty demand and penalties against the appellants.

The appellant's representative argued that no incriminatory evidence was found during investigation, and no inculpatory statements were recorded. It was contended that the Revenue failed to establish procurement of other necessary inputs for manufacturing the goods clandestinely. Lack of evidence regarding electricity consumption and absence of buyer statements to prove clandestine clearance were highlighted. The representative emphasized the need for cross-examination of the supplier and challenged the validity of the impugned order.

Upon review, the Tribunal found insufficient evidence to sustain the charge of clandestine manufacture and clearance of goods against the appellants. The Tribunal noted the absence of buyer statements, lack of efforts to ascertain raw material procurement, and failure to allow cross-examination of the supplier. Citing a similar case precedent, the Tribunal concluded that the charges were based on assumptions and presumptions without concrete evidence. Consequently, the proceedings against the appellants were deemed unsustainable, leading to the setting aside of the impugned order.

In the absence of cogent evidence, the Tribunal ruled in favor of the appellants, stating that the charges were not sustainable and were solely based on assumptions. The impugned order was set aside, and the appeals were allowed with any consequential relief.