2024 (8) TMI 149 - AT - Central Excise

Clandestine removal - MS ingots - onus to prove on parties - violation of provisions of section 6 of the Central Excise Act, 1944 read with Rule 9 of Central Excise Rules, 2002 (CER 2002) and Rules 6, 8 and 10 of the above Rules - Penalty under Rule 26 of C.E.R. 2002 - HELD THAT - It must be stated that it is for the department to establish by methods known to law that duty was evaded and to bring out the role of the parties alleged to have been involved in a satisfactory manner. That onus cannot be shifted to the parties against whom allegations have been made. It is only when sufficient evidence, either direct or circumstantial, in respect of its allegations was disclosed by the Revenue that adverse inference could be drawn against the noticees. In the case of imposition of penalty, it has to be proved further by revenue that the person penalised was involved in the blame worthy act with which he is charged. On enquiry it was informed by revenue that the main noticee M/s. Vaibhav Corporation, Madurai has not filed an appeal. It is found that the impugned order is very cryptic about the part played by the appellants. The case against all the appellants has been bunched together and disposed of in a single para on generalities without discussing the specific wrong doings in each individual case. The Department has built up the case of clandestine removal against the appellants based on the third-party documents which were recovered and statements that were recorded from the M/S. Vaibhav Mercantile without any evidence collaborating the alleged activity at the appellants end, like goods receipt register, stock register, transporters trip sheets, consignment note, VAT assessment of the appellant on the particular period, profit Loss account/ yearly balance sheet of the appellants, statements etc. In fact, the appellants / company officials have in their statements categorically denied indulging in any unaccounted transactions. In such a situation it is difficult to sustain the charge of blame worthy conduct by the appellants merely on the assumptions and presumptions and hence no penalty could have been imposed on them. Revenue has failed to prove its case and hence the impugned order merits to be set aside. The impugned order is set aside in as much as it relates to the appellants - appeal allowed.

Summary

Issues:
Appeal against order dated 31.12.2014 passed by Commissioner of Central Excise, Madurai regarding evasion of central excise duty on MS ingots.

Detailed Analysis:

Issue 1: Allegations and Penalties
The case involved M/s. Vaibhav Corporation allegedly evading central excise duty on MS ingots. Officers seized documents and hard discs, recorded statements, and found violations of Central Excise Act and Rules. Adjudicating authority confirmed demand and imposed penalties, including Rs.10,00,000 penalty under Rule 26 of C.E.R. 2002 on appellants. Appellants denied involvement and challenged penalties.

Issue 2: Appellants' Defense
Appellants, including M/s Aditya Ferro Alloys, M/s Dhandapani Steel Pvt. Ltd., M/s Ferromet Steels Pvt. Ltd., M/s Kamatchi Steel Ltd., M/s Goyal Ispat Ltd., and M/s GBR Metals Pvt. Ltd., argued they had no transactions with M/s Vaibhav Corporation. They presented evidence of sourcing ingots locally or from other suppliers, denying any connection to the alleged evasion.

Issue 3: Legal Validity of Penalties
Appellants contended that penalties under Rule 26 of C.E.R. 2002 were imposable only on individuals, not firms or companies. They argued that the proposal to penalize entities under this rule was legally invalid. They emphasized the lack of concrete evidence linking them to the alleged evasion, such as invoices, transport records, or corroborative evidence.

Issue 4: Burden of Proof and Evidence
The Tribunal highlighted that the burden of proof rested on the revenue department to establish duty evasion and the involvement of accused parties satisfactorily. It noted that penalties required proof of the accused's direct involvement in the alleged wrongful acts. The Tribunal criticized the lack of specific details in the impugned order regarding the appellants' roles and the reliance on third-party documents without corroborating evidence.

Issue 5: Tribunal's Decision
After thorough analysis, the Tribunal found the impugned order lacking in specific details and evidence against the appellants. It noted the absence of concrete proof linking the appellants to the alleged evasion. Consequently, the Tribunal set aside the order concerning the appellants, stating they were eligible for consequential relief as per law.

In conclusion, the Tribunal found the allegations against the appellants unsubstantiated and lacking in evidential support, leading to the decision to overturn the penalties imposed on them. The judgment emphasized the importance of concrete evidence and burden of proof in establishing claims of duty evasion and penalizing entities under relevant rules.