2024 (12) TMI 274 - HC - Central Excise

Clandestine removal of goods - evasion of duty - shortage of 3500 Kgs of copper scrap - assessee had been receiving substantial quantity of copper scrap without any bills/documents and was not entering the details of sale in the statutory records - proof beyond doubt - preponderance of probabilities - HELD THAT - In criminal cases, the standard of proof as required to prove the charges in a criminal trial is proof beyond doubt , whereas, the adjudication proceedings are in the nature of civil proceedings and not criminal proceedings and therefore, the standard of proof of civil proceedings i.e. preponderance of probability is applicable in adjudication proceedings. It is equally well settled that in adjudication proceedings to establish the charge of clandestine removal and under valuation, Revenue is not required to prove the case with mathematical precision. Such charges are to be established on the basis of preponderance of probabilities. However, the conclusions to be drawn are necessarily to be logical and not on the basis of presumptions and assumptions. Suspicion, howsoever grave, cannot replace the test of proof. The mere fact that the respondent agreed to deposit the duty amount to avoid any kind of litigation, itself cannot be held to be the basis for confirming the duty demand against the respondent. CESTAT found that the case of unaccounted manufacture and clearance was built upon only sketchy evidence without concrete corroboration and whatever evidences formed basis for the case of Revenue, fell short of the minimum requirement of credible case of clandestine removal - the CESTAT conducted a meticulous exercise to examine and appreciate the evidence on record in the light of settled principles and came to a categoric finding that the case of unaccounted manufacture and clearance was built on sketchy evidence without any concrete corroboration and whatever evidence formed basis of the case of the Revenue fell short of the minimum requirement of credible case of clandestine removal. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the premises of the respondent, we hold that the impugned order dated 08.06.2017 passed by the CESTAT does not suffer from any serious error and does not merit interference. The appeal is therefore dismissed.

Issues Involved:

1. Allegations of clandestine removal of goods and evasion of duty.
2. Reliability of evidence, including documents and statements.
3. Burden of proof and standard of evidence in adjudication proceedings.
4. Legitimacy of retracted statements and their evidentiary value.
5. Procedural lapses in verification and investigation by the Revenue.

Detailed Analysis:

1. Allegations of Clandestine Removal and Evasion of Duty:

The core issue in this case was the allegation against the respondent-assessee of clandestine removal of copper ingots and wire rods without payment of duty. The Revenue claimed that the assessee engaged in the unaccounted manufacture and clearance of these goods, based on documents seized during searches and statements of certain individuals. The initial adjudication upheld these charges, but upon appeal, the CESTAT found the evidence insufficient to support such serious allegations. The Tribunal emphasized that charges of this nature require strong evidence, which was lacking in this case.

2. Reliability of Evidence:

The Tribunal scrutinized the evidence presented by the Revenue, which included documents recovered from individuals associated with the respondent and their statements. The CESTAT noted discrepancies in the evidence, such as the method of stock verification being based on visual estimation rather than actual weighment. Additionally, the Tribunal questioned the credibility of documents allegedly indicating unaccounted production, as they did not align with the operational capacity of the respondent's facilities.

3. Burden of Proof and Standard of Evidence:

The judgment highlighted the difference in the standard of proof required in adjudication proceedings versus criminal trials. In civil proceedings like this, the standard is "preponderance of probabilities" rather than "proof beyond doubt." However, the Tribunal stressed that conclusions must be logical and not based on presumptions. The burden of proof was on the Revenue to establish clandestine removal, which they failed to do convincingly.

4. Legitimacy of Retracted Statements:

The Tribunal considered the retraction of statements by individuals whose testimonies were used against the respondent. Citing Supreme Court jurisprudence, the CESTAT noted that retracted confessions should not be the sole basis for findings unless corroborated by independent evidence. The retraction letters and lack of corroborative evidence weakened the Revenue's case, leading the Tribunal to disregard these statements as unreliable.

5. Procedural Lapses in Verification and Investigation:

The Tribunal identified procedural shortcomings in the Revenue's investigation, such as the failure to verify alleged sales with buyers or examine excess electricity consumption. The CESTAT found no evidence of unaccounted transportation of goods or excess labor, which are critical indicators of clandestine operations. The lack of comprehensive investigation and reliance on incomplete evidence led to the dismissal of the Revenue's claims.

Conclusion:

The High Court upheld the CESTAT's decision, affirming that the Revenue's case was built on insufficient and unreliable evidence. The judgment emphasized the necessity for tangible and corroborative evidence in cases of alleged duty evasion. The appeal was dismissed, reinforcing the principle that serious allegations require equally strong and credible evidence to substantiate them.

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