2017 (3) TMI 839 - AT - Central Excise

Clandestine removal under the guise of second sale - Evasion of the duty - Penalty - Held that - the investigation has more than adequately established the questionable modus operandi adopted by the appellants. We further find that the adjudicating authority has analytically and objectively dealt with the matter at hand and reached to judicious conclusion each of the appellants committing breach of law. It is seen that Revenue discharged burden of proof. But, appellants failed to demolish the stand taken and evidence adduced by Revenue against appellants. From the facts on record the active roles of the Bill traders, Brokers, Transporters and Kerala buyers etc., causing evasion being conduits of the racket have come out very clearly and established by Revenue. They were instrumental for clearance of goods by M/s. Nav Steel clandestinely to the Kerala buyers and route the sale proceeds from the latter to the brokers. Both documentary and oral evidence gathered demonstrated scientific evasive method followed by the racket to cause subterfuge to Revenue - Documents recovered from the witnesses including the Kerala buyers proved the ill intent of appellant manufacturer and that remained intact, proving against appellant. Clandestinely removed goods were cleared under cover of dummy invoices to Bill traders/brokers and the latter receiving payments thereof in their name by demand drafts were encashed and amount in cash handed over to the appellant manufacturer after deducting their commission - Appeal dismissed - decided against the assessee.

Issues Involved:
1. Allegation of clandestine removal of goods.
2. Reliance on weighbridge slips as evidence.
3. Examination of buyers and other evidence.
4. Validity of power consumption data as evidence.
5. Role of various parties in the alleged fraud.
6. Burden of proof and presumption.
7. Credibility of investigation and evidence.
8. Legal principles regarding fraud and misrepresentation.

Analysis of the Judgment:

1. Allegation of Clandestine Removal of Goods:
The Revenue alleged that the appellant indulged in clandestine removal of goods under the guise of "second sales." The modus operandi involved supplying goods to Kerala buyers under parallel invoices, which were then replaced by second sales invoices from bill traders. Payments were routed through bill traders and brokers, who settled accounts and paid the manufacturer in cash.

2. Reliance on Weighbridge Slips as Evidence:
The appellants contended that the weighbridge slips, which did not contain the name of the appellant company, were the sole basis of the allegation. They argued that these slips were not recovered from their premises and lacked details such as party name and nomenclature of goods. The Revenue countered that the slips were corroborated by other evidence, including statements from the weighbridge clerk and the accountant.

3. Examination of Buyers and Other Evidence:
The appellants argued that no buyers from Kerala were examined, and no direct evidence of payments from Kerala buyers was provided. The Revenue responded that statements were recorded from Kerala buyers and other parties involved, and that the investigation was comprehensive, involving multiple sources of evidence.

4. Validity of Power Consumption Data as Evidence:
The appellants challenged the use of power consumption data to estimate clandestine removals, arguing that it was not a reliable parameter. The adjudicating authority noted that power consumption was not the primary basis for the adjudication but was considered along with other evidence, such as the rise in electricity usage during the relevant period.

5. Role of Various Parties in the Alleged Fraud:
The adjudicating authority detailed the roles of brokers, manufacturers, bill traders, transporters, and Kerala buyers in the alleged fraud. Each party's involvement was described, showing how they facilitated the clandestine removal of goods and the routing of payments.

6. Burden of Proof and Presumption:
The tribunal emphasized that the burden of proof was on the Revenue, but absolute certainty was not required. The doctrine of presumption allowed the court to infer facts based on the evidence provided. The appellants failed to rebut the evidence and did not come out with clean hands.

7. Credibility of Investigation and Evidence:
The tribunal found the investigation to be credible and thorough. The adjudicating authority had analyzed the evidence, including statements and documents recovered from various parties. The appellants' contention that the investigation was faulty was dismissed, as the evidence was found to be cogent and reliable.

8. Legal Principles Regarding Fraud and Misrepresentation:
The tribunal cited legal principles regarding fraud, noting that fraud vitiates even the most solemn proceedings. Misrepresentation and deceit were considered serious offenses, and the appellants' actions were found to be deliberate and fraudulent. The tribunal referenced several legal precedents to support its findings.

Conclusion:
The tribunal dismissed the appeals, finding that the appellants had engaged in a premeditated scheme to evade excise duty through clandestine removal of goods. The investigation was deemed credible, and the evidence was sufficient to establish the appellants' guilt. The tribunal emphasized the seriousness of fraud and the need for accountability, rejecting the appellants' arguments and upholding the adjudication order.

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