2024 (10) TMI 449 - AT - Central Excise

Clandestine manufacture and clearance of goods - demand based on conjectures and surmises - lack of cogent evidence - violation of principles of natural justice - HELD THAT - It is found that to build up its case the Revenue has largely dwelt upon conjectures and surmises for instance the presumption that in a medium scale industry like that of the appellant not a leaf moves without the nod from the higher authority . However such blanket statements lead nowhere to uphold clandestine manufacture and clearance of finished goods. It is also noted that the sale invoices clearly indicate that the sale of the goods was made ex-factory. The department has not repudiated the assssee s contention that the delivery of the goods was taken by the broker of M/s. Industrial Associates (buyer) at the factory gate itself. The reliance placed by the learned adjudicating authority to build up this case for mention by way of indication of wrong vehicle registration numbers on the invoices was in the context of the recipient of the finished goods (page 56) and to make out by way of analogy a case of clandestine clearance and saddling the manufacturer with consequences thereof is completely uncalled for. This is more so when receipt of raw material capability to manufacture and clearance of goods have not been doubted upon. As the department has not been able to establish the alleged clandestine movement of the finished goods and dispute the duty paid on the impugned goods that are a subject matter of the present appeal there can be no case for re-demanding the same along with interest. To hold such serious charges of clandestine clearance no case can be made out merely on circumstantial evidence. The appellants have sufficiently been able to establish that they received duty-paid material from their factory at Kodarma which fact again is not disputed and manufactured finished goods therefrom which were sold from the factory gate. Goods procured from their sister unit were at times sold as such from their Durgapur unit but were largely used to produce finished goods by way of their own production at their Durgapur unit and finished goods so cleared upon payment of applicable rate of Central Excise duty and Cess. This sale is duly reflected in the returns filed for the relevant period with the department. The fact that in as much as 28 cases out of 61 no discrepancy in recording of vehicle numbers have been noticed by the department the fact of sale of goods being ex works and payments made through banking transactions the receipt of raw material duly explained the department not being able to substantiate the charge by way of any corroborative evidence the department s case stands on a weak footing having been built upon on presumptions and surmises. The impugned order is set aside - appeal allowed.

Summary

Issues: Allegation of clandestine manufacture and clearance of goods, demand of duty, penal liability on manufacturer and Chairman & Managing Director, violation of principles of natural justice.

Analysis:
1. The case involves an appeal against an Order-in-Original passed by the Commissioner of Customs, Central Excise & Service Tax, Durgapur Commissionerate, alleging clandestine manufacture and clearance of goods by the appellant, a manufacturer of iron and steel products. The appellant supplied goods to a buyer on ex-factory basis, but the department contended that the goods were not physically delivered to the buyer, leading to a demand for duty and proposals for penal liability on the manufacturer and Chairman & Managing Director.

2. The Tribunal observed that the Revenue's case lacked concrete evidence to prove clandestine activities. The appellant argued that the goods were sold ex-factory, payments were received through banking channels, and discrepancies in vehicle numbers on invoices did not establish clandestine activities. The department's case relied on conjectures and surmises, without conclusive proof of wrongdoing by the appellant.

3. The Tribunal emphasized that the department's case was weak, built on presumptions rather than substantiated evidence. The appellant demonstrated receipt of duty-paid material, manufacturing of finished goods, and proper payment of Central Excise duty and Cess. The department failed to establish clandestine movement of goods or dispute the duty paid by the appellant, leading to a lack of grounds for re-demanding duty along with interest.

4. The appellant also raised a procedural issue regarding the denial of cross-examination of a crucial witness by the lower authority, highlighting a violation of principles of natural justice. The Tribunal found that the lower authority's failure to address this issue warranted setting aside the order, further weakening the department's case against the appellant.

5. Ultimately, the Tribunal set aside the order of the lower authority and allowed the appeals, concluding that the department's case was insufficiently supported by corroborative evidence and relied heavily on unfounded presumptions and surmises. The judgment was pronounced on 09 Oct 2024, in favor of the appellant.