2006 (6) TMI 8 - AT - Central Excise

Central Excise - The demand cannot be confirmed on the basis of documents prepared by the assessee to obtain higher bank loan

Summary

Issues:
1. Allegation of clandestine removal of goods and confirmation of demands.
2. Compliance with remand order and examination of evidence.
3. Violation of principles of Natural Justice.
4. Grounds for confirming demands based on documents for securing higher bank loan.
5. Lack of evidence to support demands.

Analysis:

Issue 1: Allegation of clandestine removal of goods and confirmation of demands
The appeals arose from an Order-in-Original confirming demands on the allegation of clandestine removal of goods. The appellants argued that they showed higher clearance on record to receive higher financial consideration from banks. They contended that demands cannot be confirmed based solely on this practice without evidence of removal of final products without payment of duty, which the Revenue failed to prove.

Issue 2: Compliance with remand order and examination of evidence
The Tribunal had remanded the matter with specific directions to the adjudicating authority to supply the investigation report and give specific findings regarding affidavits from consignees. However, the Commissioner did not comply with the remand order, leading to a violation of principles of Natural Justice. The non-examination of affidavits and non-furnishing of the investigation report were key factors in setting aside the order.

Issue 3: Violation of principles of Natural Justice
The failure to examine the affidavits filed by consignees and the disregard of the Tribunal's remand direction constituted a violation of principles of Natural Justice. Such non-compliance and lack of examination of evidence were grounds for setting aside the order.

Issue 4: Grounds for confirming demands based on documents for securing higher bank loan
The Department relied on documents filed by the assessee to secure higher bank loans as the primary ground for confirming the demands. However, the Tribunal held that raising commercial invoices for bank loans cannot be the sole basis for confirming Excise duty without evidence of actual manufacture and removal of goods without payment of duty.

Issue 5: Lack of evidence to support demands
The absence of evidence regarding the purchase of goods, higher electricity consumption, sale to purchasers, and receipt of funds, coupled with the reliance on private records for securing bank loans, led to the conclusion that demands could not be confirmed. The Tribunal emphasized the necessity of corroborative evidence for confirming demands related to clandestine removal of goods.

In conclusion, the appeals were allowed with consequential relief due to the lack of evidence supporting the demands and the violation of Natural Justice principles in the adjudication process.