2015 (7) TMI 501 - AT - Central Excise

Clandestine manufacture and removal of excisable goods - Imposition of interest and equivalent penalty - Demand based on confession statements made by some people - statements recorded were retracted subsequently by way failing affidavits within a few days - Held that - It is now a well understood principle that a case of clandestine activity cannot be established simply on the basis of few confessional statements, which are retracted by the persons. In the case of Commissioner of Central Excise vs Saakeen Alloys Pvt. Ltd. 2014 (5) TMI 606 - GUJARAT HIGH COURT it has been held by Hon ble Gujarat High Court that in the absence of other corroborative evidences confessional statements along are not sufficient to establish the case of clandestine manufacture and removal. - case of clandestine manufacture and clearance is not established against the appellant - Decided in favour of assessee.

Summary

Issues:
1. Alleged clandestine manufacture and removal of excisable goods.
2. Imposition of penalties on the main appellant and other directors.
3. Reliability of confessional statements as evidence.
4. Lack of corroborative evidence in the form of excess raw-material purchases, transportation of goods, and cash recovery.
5. Legal precedent regarding establishment of clandestine activities based solely on retracted confessional statements.

Analysis:
1. The appeals were filed concerning the alleged clandestine manufacture and removal of excisable goods by the main appellant, resulting in a demand of Rs. 15,42,047 along with penalties imposed under the Central Excise Act, 1944. The case was based on confessional statements of individuals involved, which were later retracted, leading to a lack of concrete evidence such as excess raw-material purchases to support the allegations.

2. The main appellant and other directors faced penalties based on the confessional statements, which were contested by their legal representatives. The argument highlighted the absence of recorded statements for some directors, indicating their lack of involvement in any clandestine activities. Legal precedent cases were cited to support the argument that penalties cannot be imposed solely on retracted confessions without corroborative evidence.

3. The reliability of the confessional statements was a crucial aspect of the case, with the defense emphasizing that the statements were retracted due to alleged duress. The lack of opportunity for the accused to explain their case before penalties were imposed raised concerns about procedural fairness and the validity of the evidence presented.

4. The absence of corroborative evidence, such as excess raw-material procurement or cash seizures, further weakened the case against the appellants. The court noted the importance of concrete evidence to establish clandestine activities, as highlighted in legal precedents where confessional statements alone were deemed insufficient to prove such allegations.

5. The judgment drew upon legal precedents to establish that clandestine activities cannot be solely proven based on retracted confessional statements. The court cited a case where the lack of corroborative evidence led to the dismissal of demands based on confessions. Ultimately, the appeals were allowed, indicating a lack of substantial evidence to uphold the allegations of clandestine activities and penalties imposed on the appellants.