2024 (10) TMI 892 - AT - Central Excise

Clandestine removal - Time limitation for issuance of SCN - issuance of show cause notice much belatedly on 28.9.2020 after invoking the extended period despite starting the investigation in the month of May, 2016 itself - suppression of facts or not - discharge of burden of establishing beyond reasonable doubt the clandestine manufacture and removal of alleged assembled T.V. sets from the warehouse/godown at Bhiwandi. HELD THAT - It is the case of the department and also the finding of the learned Commissioner that the case is booked by the department on the basis of the statements as well as on the basis of manufacturing process of the appellant and recovery of certain documents from the godown, which collectively established that the appellant assembled parts of TV sets at their godown at Bhiwandi that amounts to manufacture and liable to Central Excise duty. Since the statements recorded cannot be relied, the purported manufacturing process which has also been mentioned in those statements also meet the same fate. It is failed to find from record about any manufacturing process being witnessed by the department during search in the godown. Mere finding some table alongwith walls having electricity socket and few TV sets or its parts cannot be considered as corroborative evidence. From the allegations and arguments, the department tried to pitch it to the extent that the appellant was dealing only in cash payment in order to avoid the identity of its customers. But the ledger account of the appellant establishes other way round. Most of the payments were received through banking channel and the account numbers of the buyers were also mentioned in the ledger. On the sale invoices issued by the appellant, name and address of the buyer alongwith VAT TIN were clearly mentioned from which the bank details and the whereabouts of the said buyers were ascertainable. What the department did, instead of getting the details from the records provided by the appellants by way of ledger, sale invoice etc. they tried to get them through Google search on internet. Therefore there are no force in the submission of the department that in order to clandestinely removing the TV sets incomplete address or incomplete details of the buyers were provided by the appellant. A case of clandestine removal cannot be proved merely on the basis of probabilities. Revenue did not produce any clinching corroborative evidence to discharge its obligation to prove clandestine removal. Their case is mainly based upon conjecture and surmises. The department failed to establish that the appellant received spare parts etc. clandestinely or some other corroborative evidence to support clandestine removal of complete TV sets from the godown. A consistent view has been taken by this Tribunal time and again that the proceedings before the Settlement Commission are different from the adjudication proceedings. In proceedings before the Settlement Commission there was no requirement to adjudicate any allegations raised in the show cause notice whereas in adjudicating proceedings the authority concerned has to adjudicate all the issues/allegations raised in the show cause notice - Once the issue has been settled by the Settlement Commission on an application filed by an assessee, the adjudicating authority in different proceedings for different show cause notice concerning same assessee cannot base its adjudication on the findings recorded by the Settlement Commission. Therefore, the Adjudicating Authority is not justified. As the department has failed to establish any case against the appellant, the duty demand alongwith interest and respective penalties as mentioned in the show cause notice in issue herein cannot survive. Invocation of extended period of limitation - HELD THAT - It is no doubt true that when the facts were within the knowledge of the department then the department cannot take the plea of suppression or misdeclaration etc. only to invoke extended period for issuing the show cause notice after 4-5 years. What is gathered from the show cause notice herein that the facts about alleged misdeclaration or suppression etc. were within the knowledge of the department in the year 2016 itself when DRI started investigation in the said year by recording statements etc and informed the department herein - there is no dispute that the fact about alleged mis-declaration was within the knowledge of the department in the year 2016 itself when DRI initiated investigation and show cause notice therein was also issued to the appellant by DRI on 15.7.2016. As per case records, the basis of the instant show cause notice is the information received from DRI in the year 2016 itself but still the instant show cause notice came to be issued much belatedly in the year, 2020 after invoking the extended period which is not invokable. Mere recovery of certain parts or TV sets or cartons in the instant case is not sufficient to prove clandestine manufacture/assembling or removal. Clinching evidence is required to be produced by the department to substantiate the allegations levelled against the appellants beyond any reasonable doubt which, in the facts of the present case, the department has failed to prove. Neither any evidence of manufacturing of finished goods i.e. TV sets nor its onward transportation or its buyers have been produced on record by the department. Statements, if any, can only provide the missing links to corroborate facts and they cannot, of themselves, establish facts or the whole claim of alleged events. As the duty demand itself has been set aside, there is no question of any interest, and/or penalties etc. On the ground of limitation also the show cause notice cannot sustain. The show cause notice is not sustainable and the adjudication order impugned herein is therefore set aside - Appeal allowed.

Summary

Issues Involved:

1. Justification for issuing a belated show cause notice invoking the extended period.
2. Attribution of suppression in the facts and circumstances.
3. Establishment of clandestine manufacture and removal of TV sets beyond reasonable doubt.

Issue-wise Detailed Analysis:

1. Justification for Issuing a Belated Show Cause Notice:

The appellant contested the invocation of the extended period for issuing the show cause notice, arguing that the facts were known to the department in 2016, yet the notice was issued on 28.9.2020. The tribunal agreed, citing the Supreme Court's precedent in Nizam Sugar Factory vs. Collector of Central Excise, which states that once facts are known to authorities, they cannot be considered suppressed in subsequent notices. The tribunal concluded that the show cause notice was time-barred and not sustainable, as the department was aware of the alleged misdeclaration since 2016.

2. Attribution of Suppression:

The tribunal found no evidence of suppression by the appellant. The facts were within the department's knowledge since 2016, as evidenced by the DRI's investigation and the issuance of a show cause notice by DRI on 15.7.2016. The tribunal emphasized that the department cannot claim suppression to justify invoking the extended period when it had prior knowledge of the facts.

3. Establishment of Clandestine Manufacture and Removal:

The tribunal scrutinized the evidence presented by the department, which relied heavily on statements recorded under Section 108 of the Customs Act and the presence of certain facilities in the appellant's godown. The tribunal found these statements unreliable, as they were retracted during cross-examination and lacked corroborative evidence. The tribunal also noted the absence of tangible evidence, such as excess raw materials, unaccounted finished goods, or proof of actual transportation of goods, which are essential to establish clandestine manufacture and removal.

The tribunal criticized the department's reliance on assumptions and the lack of corroborative evidence linking the appellant to clandestine activities. It highlighted that the presence of wooden tables and electrical points in the godown did not constitute evidence of manufacturing. Furthermore, the tribunal dismissed the department's argument based on the Settlement Commission's order, stating that proceedings before the Settlement Commission differ from adjudication and cannot be used to prove allegations in a separate proceeding.

In conclusion, the tribunal found that the department failed to provide sufficient evidence to substantiate the allegations of clandestine manufacture and removal. The duty demand, interest, and penalties were set aside, and the appeal was allowed with consequential relief. The show cause notice was deemed unsustainable on both factual and legal grounds, including the issue of limitation.