2024 (5) TMI 1055 - AT - Central Excise

Clandestine manufacture and surreptitious removal - demand based on statements of the buyers and the appellants recorded during the course of investigation - retraction of statements - HELD THAT - The statements of the appellants have been retracted, but statements have not been tested in terms of section 9D of the Central Excise Act, 1944 to know the veracity of the statements by examination in chief and after examination in chief of all third party statements, cross-examination of the said statements is required to be done. All these aspects are missing in this case - From the investigation and facts, it is not coming out anywhere that the payment received in the bank account of M/s. Bharat Suppliers was sent to appellant No.1, 2 or 3 by any means and there is no admission to that extent by the appellants. Admittedly, in the case in hand this Tribunal in the case of M/S ARYA FIBRES PVT. LTD., M/S NOVA PETROCHEMICALS LTD. AND OTHERS VERSUS CCE AHMEDABAD-II 2013 (11) TMI 626 - CESTAT AHMEDABAD has laid down the certain parameters to establish clandestine removal of goods, the show cause notice is not in conformity with the criteria in the case of Arya Fibres Pvt.Ltd. The allegation of clandestine removal of goods is not sustainable. Moreover, the statements which has been relied by the adjudicating authority in the impugned order, are not tested as per procedure prescribed under section 9D of the Central Excise Act, 1944 to find out the genuineness of the statements recorded during the course of investigation - the allegatoin of clandestine removal of goods by appellant No.1 is not sustainable against the appellants, the same has been alleged on assumption and presumption without corroborative evidences, therefore, no demand of duty is sustainable against the appellants alleging clandestine removal of goods, consequently, no penalty can be imposed on the appellants. It is further noted that the Ld.Counsel for the appellant has taken the ground that they have paid the entire amount of duty along with interest and 25% penalty under protest, the same is required to be refunded to the appellant as the said amount has been paid by the appellant after adjudication of the case. Therefore, bar of unjust enrichment is not applicable to the facts of this case. The amount of duty, interest and penalty paid by the appellant after adjudication and under protest for entertaining the appeals filed by the appellant is refundable to the appellant - Appeal disposed off.

Issues Involved:

1. Allegation of clandestine removal of goods.
2. Validity and reliability of statements and documents.
3. Burden of proof and corroborative evidence.
4. Refund of duty, interest, and penalty paid under protest.

Summary:

Allegation of Clandestine Removal of Goods:
The appellant, M/s. Bengal Iron Corporation, was accused of evading central excise duty through clandestine manufacture and surreptitious removal of finished products. The DGCEI conducted searches and recovered documents suggesting that the appellant was managing the business activities of M/s. Bharat Suppliers, which was allegedly used to disguise the removal of goods without paying excise duty.

Validity and Reliability of Statements and Documents:
The appellants contended that the impugned order was based on assumptions and lacked material evidence. They argued that the statements recorded during the investigation were retracted and not tested for veracity u/s 9D of the Central Excise Act, 1944. The Tribunal noted that mere possession of documents related to trading activities did not establish clandestine removal. The Tribunal emphasized the need for corroborative evidence, such as procurement of raw materials, labor, electricity consumption, and transportation details, which were missing in this case.

Burden of Proof and Corroborative Evidence:
The Tribunal reiterated the settled principle that the burden of proof for clandestine removal lies on the Department, which must be supported by sufficient tangible and affirmative evidence. The Tribunal found that the Department failed to provide corroborative evidence, such as excess raw materials, finished goods, or electricity consumption, to support the allegations. The Tribunal cited several judgments, including CCE Vs. Bihariji Manufacturing Co. Pvt. Ltd. and Principal Commissioner Vs. Shah Foils Ltd., to emphasize the necessity of corroborative evidence.

Refund of Duty, Interest, and Penalty Paid Under Protest:
The appellants had paid the entire amount of duty, interest, and 25% penalty under protest after the adjudication. The Tribunal held that since the demand was based on assumptions and lacked corroborative evidence, the appellants were entitled to a refund of the amounts paid. The Tribunal clarified that the bar of unjust enrichment did not apply as the payment was made under protest after adjudication.

Conclusion:
The Tribunal concluded that the allegation of clandestine removal was not sustainable due to the lack of corroborative evidence and the failure to test the statements as per the prescribed procedure. Consequently, no demand of duty or penalty was sustainable against the appellants, and the amounts paid under protest were refundable. The appeals were disposed of accordingly.

← Previous Next →