2017 (5) TMI 948 - AT - Central Excise

Clandestine manufacture and removal - It has been alleged in the said show cause notice that the appellant cleared 8178 MT of ingots by clandestinely manufacturing and clandestinely removing without maintenance of record, evaded Central Excise Duty of ₹ 1,36,05,002/- as mentioned in loose slips - Held that - there are no evidence about the excess raw material procured, instances of actual removal of unaccounted finish goods, discovery of such finished goods outside the factory, the parties identified to whom such sale has been made, any evidence of receipt of sale proceeds, nor statement of any buyers - the requirements to establish clandestine manufacture and clearance have not been satisfied by the revenue to confirm the demand in the present case. The officers of revenue conveniently presumed that Raj Ratan stated in loose slips, to be appellant. Under such mistake of understanding of the word Raj Ratan stated on the loose slips to be the appellant without establishing that Raj Ratan stated on the slips was appellant and contrary to the statement of Shri Pawan Agarwal dated 25.02.2004 wherein Shri Pawan Agarwal did not state that he used to do broking for appellant, revenue has framed charges. Therefore, the said SCN is not sustainable. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegations of clandestine removal of goods without payment of duty.
2. Validity of evidence and statements relied upon by the Original Authority.
3. Cross-examination and statements of involved parties.
4. Compliance with legal requirements to establish clandestine manufacture and clearance.

Analysis:

Issue 1: Allegations of clandestine removal of goods without payment of duty
The case involved allegations against the appellant for clandestinely manufacturing and removing M.S. Ingots without payment of Central Excise Duty. The show cause notice accused the appellant of evading duty amounting to a substantial sum. The Original Authority confirmed the demand and imposed penalties based on the evidence presented.

Issue 2: Validity of evidence and statements
The appellant raised several grounds of appeal, challenging the evidence and statements relied upon by the Original Authority. They disputed the acceptance of the contents of loose slips by the directors of the companies involved. The appellant argued that the case was built on third-party evidence and highlighted doubts regarding the recovery and verification of the loose slips.

Issue 3: Cross-examination and statements
During the proceedings, cross-examination revealed discrepancies and challenges to the authenticity of the evidence. Statements of key individuals, including Shri Pawan Agarwal and Shri Sunil Khatri, played a significant role in the case. The appellant emphasized that crucial documents were not recovered from their premises, and the case primarily relied on third-party information.

Issue 4: Compliance with legal requirements
The Tribunal analyzed the evidence presented in light of legal standards for establishing clandestine manufacture and clearance. Referring to a ruling by the Hon'ble High Court of Delhi, the Tribunal emphasized the need for tangible evidence, including raw materials, instances of unaccounted goods removal, sale proceeds, and buyer details. The Tribunal found a lack of such evidence in the case, leading to the conclusion that the revenue did not meet the requirements to confirm the demand.

In conclusion, the Tribunal set aside the impugned Order-in-Original, allowing the appeal due to the failure to establish clandestine manufacture and clearance as per legal standards. The appellant was granted consequential relief as per the law. The judgment highlighted the importance of concrete evidence and compliance with legal requirements in cases involving allegations of clandestine activities to ensure fair adjudication.