2017 (4) TMI 1221 - AT - Central Excise

Clandestine manufacture and removal - PVC pipes - demand on the basis of ledger books recovered, parallel invoices and weighment slips - extended period of limitation - Held that - The appellant had made inculpatory statement but merely the statement is not sufficient to allege the charge of clandestine removal of goods. In fact, that statement should be corroborated by some evidence which revenue have failed to do so. Therefore, the demand on the basis ledger book or ledger /loose sheets recovered during the course of investigation are not sustainable. The original copy of the invoices would have been recovered from the buyers of the goods but the statement/documents recovered from the buyers were not relied upon documents. Moreover, it has been recorded by the adjudicating authority in the impugned order that no records were resumed. There is no evidence of the sources of the original invoices, therefore, the clearances of basis of parallel invoices cannot be confirmed. Moreover, it is alleged that parallel invoices have been issued but no investigation was conducted at the end of the buyers whose names were reflecting in the parallel invoices. In that circumstances, the demands cannot be confirmed on the basis of parallel invoices recovered during the course of investigation. Therefore, the demand on account of parallel invoices is not sustainable. The weighment slip produced by the appellant these weighment slip does not have any contents of the goods, whether the finished goods or raw material or there is no evidence to corporate that these weighment slip pertains to the clandestine removal of the goods by the appellant. In the absence of any positive evidence the demand on the basis of weighment slip cannot be confirmed against the appellant. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegations of clandestine removal of goods.
2. Demand based on ledger book entries.
3. Demand based on parallel invoices.
4. Demand based on weighment slips.
5. Demand based on loose sheets.
6. Demand based on paper marked A/c.
7. Demand based on letter from M/s Aggarwal Pipe Store.
8. Invocation of extended period of limitation.
9. Imposition of penalties.

Detailed Analysis:

1. Allegations of Clandestine Removal of Goods:
The appellants were accused of clandestine removal of PVC pipes to evade central excise duty. The investigation involved physical stock taking, scrutiny of private and statutory records, and statements from the directors and associated individuals. The core of the allegations was based on discrepancies between physical stock and recorded balances, unauthorized parallel invoices, and unaccounted weighment slips.

2. Demand Based on Ledger Book Entries:
The demand was primarily based on a ledger book containing 385 pages, allegedly maintained by the father of the director. The ledger was claimed to record personal notings and business transactions of M/s Raizo Chemicals, a separate entity. The adjudicating authority treated the entries as evidence of clandestine removal by the appellant company. However, the Tribunal found no concrete evidence linking the ledger entries to the clandestine removal of goods, highlighting the lack of details on raw material purchase, finished goods removal, sales, and electricity consumption.

3. Demand Based on Parallel Invoices:
The demand included allegations of parallel invoices where original invoices showed different buyers compared to office copies. The Tribunal noted that the original invoices should have been recovered from the buyers, but no such evidence was provided. The adjudicating authority failed to investigate the buyers listed in the parallel invoices, rendering this basis for demand unsustainable.

4. Demand Based on Weighment Slips:
Weighment slips recovered during the investigation were used to support the demand. The Tribunal found that these slips lacked specific details about the goods (whether finished or raw materials) and no corroborative evidence was presented to link these slips to clandestine removal. Thus, the demand based on weighment slips was not upheld.

5. Demand Based on Loose Sheets:
Loose sheets recovered during the search were claimed to reflect business operations of the appellant. The Tribunal observed that these sheets were trial entries made by an accountant during an interview and did not accurately represent the company's accounts. The absence of specific product descriptions and methods of manufacture and clearance further invalidated this basis for demand.

6. Demand Based on Paper Marked A/c:
A demand involving duty of ?91,370 was based on a paper marked A/c. The director denied any clandestine sale related to this paper, stating it was not in his handwriting and lacked firm details. The Tribunal found no admission of clandestine sales on this account, making the demand unsustainable.

7. Demand Based on Letter from M/s Aggarwal Pipe Store:
A demand of ?21,707 was raised based on a letter allegedly from M/s Aggarwal Pipe Store, showing discrepancies with the appellant's excise records. The Tribunal noted that no enquiry was made with M/s Aggarwal Pipe Store, and the director's statement suggested the quantity might relate to sister concerns. The lack of detailed investigation rendered this demand invalid.

8. Invocation of Extended Period of Limitation:
The Tribunal noted that the show cause notice invoking the extended period of limitation was not sustainable, referencing decisions in similar cases like Shreeji Colourchem Industries and Kothari Products Ltd. This further weakened the basis for the demand.

9. Imposition of Penalties:
Given the lack of corroborative evidence and the unsustainable nature of the demands, the Tribunal held that penalties on the appellants were not warranted.

Conclusion:
The Tribunal set aside the impugned order, holding that the demands for duty and the imposition of penalties were unsustainable due to the lack of corroborative evidence and proper investigation. The appeals were allowed with consequential relief.

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