2024 (5) TMI 62 - AT - Central Excise

Clandestine removal - case of the department is mainly based upon dairies and statements of various persons - retraction of statements - reliability of statements - denial of cross-examination - existence of corroborative evidences or not. Demand of duty based on five pocket sized dairies - HELD THAT - The seizure of the said diaries from the appellant s factory as sought to be shown by the investigation is not established; and having wrongly shown as seized from the factory premises by the investigation; weakens evidentiary value of the said diaries - the said dairies contain certain names and figures which are taken as weight of the finished goods and duty demand has been worked out on that basis. Some of the buyers of the finished goods whose names are shown in the diaries have stated in their statement that they have purchased the goods from the appellant firm with as well as without invoice and that in respect of goods purchased without invoice payment was made in cash however cross-examination of the said buyers has been denied by the Learned Commissioner without giving any justifiable reason; the said statements are therefore not relevant and admissible as evidence. It can been seen that once untested statements and rough records/diaries are discarded there is no tangible evidence absent which case of clandestine removal cannot be sustained as held in the decision of this tribunal in the case of Vishwa Traders Pvt Ltd V. Commissioner of Central Excise 2011 (10) TMI 94 - CESTAT AHMEDABAD - the demand of duty of Rs. 2, 22, 48, 302 based on said dairies as worked out at Annexure X VII is not tenable and is liable to be set aside. Demand of duty based on weighment slips/details - HELD THAT - The third party records under the statements of buyers and weighment bridge operators cannot be straightway relied upon having denied cross-examination of the said person to the appellants. Further the said party who has allegedly purchased goods from the appellant without invoice has not been made party to show cause may indicate that the statements might have been obtained from the parties by way of inducement; the said statements and records produced thereunder therefore cannot relied upon to impose duty upon the appellant firm in absence of concrete and corroborative evidence in this behalf. In view of above discussion duty demand raised cannot be sustained. Demand of duty based on rough accounts (Rojmel) of alleged buyers namely Ketan Tulsidas Sangani and Rajubhai Kacha - Demand of duty based on the duplicate invoices recovered from the factory of appellant firm - HELD THAT - No tangible and corroborative evidence viz. buyers statement transportation etc have been gathered to substantiate the allegation of removal of goods under earlier invoice number without payment of duty. Even shortages of raw material and discrepancies in maintenance of daily stock account as pointed out by the department needs to be corroborated with tangible and sufficient evidence to bring home the serious charges of clandestine removal which are clearly absent; case of department cannot be sustained on account of weak and insufficient evidence. It has been consistently held in several judicial pronouncements of the Hon ble High Court and Apex Court that in case of clandestine manufacture and removal of goods revenue has to prove it beyond doubt. The allegation of clandestine removal of goods as made out against the appellant firm is not substantiated with tangible and sufficient evidence; consequentially duty demand cannot be sustained and hence penalties upon all other appellants are also liable to be set aside. The impugned order is set aside. Appeals are allowed.

Issues Involved:
1. Legality of duty demand based on pocket-sized diaries.
2. Validity of duty demand based on weighment slips.
3. Duty demand based on rough accounts (Rojmel) of alleged buyers.
4. Duty demand based on duplicate invoices.

Summary:

1. Legality of Duty Demand Based on Pocket-Sized Diaries:
The Tribunal found that the five pocket-sized diaries, listed at Sr. No. 7 to 11 of Annexure A of the Panchnama dated 22.5.2014, were not properly recorded in the panchnama itself, weakening their evidentiary value. The statements of the partners of the appellant firm, which were retracted, claimed that these diaries were forcibly taken from a residence and related to personal brokerage business, not the factory. The Tribunal noted that the cross-examination of buyers listed in the diaries was denied, making their statements inadmissible u/s 9D of the Act. There was no corroborative evidence of actual manufacture such as raw material procurement, excess electricity consumption, or transportation records. Consequently, the duty demand of Rs. 2,22,48,302/- based on these diaries was set aside.

2. Validity of Duty Demand Based on Weighment Slips:
The Tribunal observed that the weighment slips mentioned the truck number GJ3AX5325 in only 4 out of 58 instances. The partner of the appellant firm denied the weighment of goods related to the factory. The cross-examination of third-party records and statements was denied, making them unreliable. The Tribunal concluded that without tangible and corroborative evidence of actual manufacture and transportation, the duty demand based on weighment slips could not be sustained.

3. Duty Demand Based on Rough Accounts (Rojmel) of Alleged Buyers:
The Tribunal noted that the partner of the appellant firm denied selling goods without invoices to the parties mentioned in the rough accounts. The cross-examination of these buyers was denied, and they were not made parties to the show cause notice, suggesting possible inducement. Without concrete evidence, the duty demand based on rough accounts was not upheld.

4. Duty Demand Based on Duplicate Invoices:
The Tribunal found that the partner of the appellant firm explained that the duplicate invoices related to returned goods or canceled orders. There was no corroborative evidence such as buyer statements or transportation records to support the allegation of removal without payment of duty. The Tribunal emphasized that shortages of raw material and discrepancies in stock records needed to be corroborated with substantial evidence, which was absent. Hence, the duty demand based on duplicate invoices was not tenable.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals with consequential relief, finding that the allegations of clandestine removal were not substantiated with sufficient and tangible evidence.

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