2018 (1) TMI 475 - AT - Central Excise

Clandestine removal - It is alleged that the same has been used in manufacturing of final goods, which has been cleared clandestinely - Held that - The whole case has been made out against the appellants on the basis of third party evidence which cannot be relied upon as held by this Tribunal in the case of Rudra Ventures Pvt. Ltd. 2016 (3) TMI 1173 - CESTAT CHANDIGARH , where reliance was placed in the case of MUSK TOBACCO (INDIA) PVT. LTD. Versus COMMR. OF C. EX., LUCKNOW 2011 (11) TMI 570 - CESTAT NEW DELHI , where it was held that In the absence of evidence, the duty on the basis of third party statement cannot be demanded from the appellant. As no investigation was conducted at the end of the appellants to ascertain the facts whether the appellants are indulging and no other corroborative evidence has been brought on record to allege clandestine removal of goods. The proceedings against the appellants are not sustainable. Appeal allowed.

Summary

Issues:
- Allegations of clandestine removal of goods based on third-party evidence.
- Lack of investigation at the appellants' premises.
- Reliance on third-party evidence for confirming demands.

Analysis:
1. Allegations of Clandestine Removal: The appellants contested impugned orders alleging clandestine removal of goods based on a diary recovered during a search at a supplier's premises. The appellants denied the charges, arguing that no investigation was conducted at their premises to verify the alleged clandestine activities. The appellants emphasized that the case was built solely on third-party evidence, lacking direct proof of their involvement in any wrongdoing. Citing the decision in Rudra Ventures Pvt. Ltd. Vs. CCE, Ludhiana, the appellants argued that such allegations without substantial evidence are not sustainable.

2. Lack of Investigation: The appellants raised a crucial point regarding the absence of any investigation at their premises to ascertain the veracity of the allegations. They contended that no shortage of raw materials or finished goods was proven, and no proper records maintenance checks were conducted at their factory. The appellants highlighted that relying solely on evidence from a third party, without direct verification at their premises, undermines the credibility of the allegations.

3. Reliance on Third-Party Evidence: The Tribunal analyzed the case and noted that the entire case against the appellants rested on third-party evidence, particularly statements from individuals associated with the supplier. The Tribunal referred to past judgments, including Rudra Ventures Pvt. Ltd. and Sh. Shrigonda Sahakari Sakhar Karkhana Ltd., emphasizing the need for substantial and reliable evidence in cases of clandestine activities. The Tribunal concluded that without direct evidence or proper investigation at the appellants' premises, the allegations of clandestine removal of goods lacked merit. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.

In summary, the judgment highlighted the importance of conducting thorough investigations at the premises of the accused parties to substantiate allegations of clandestine activities. Relying solely on third-party evidence without direct verification can weaken the case against the accused, as observed in past judgments. The Tribunal emphasized the need for substantial and reliable evidence to prove allegations of clandestine removal of goods, underscoring the principle that assumptions and presumptions are insufficient grounds for confirming demands.