2018 (5) TMI 1659 - AT - Central Excise

Clandestine removal - demand based on documents recovered from M/s Monu Steels, who is a commission agent - allegations based on inquiries made in the third party s documents - Held that - The Tribunal in the case of CCE & ST, Raipur Vs. P.D. Industries Pvt. Ltd. 2015 (11) TMI 455 - CESTAT NEW DELHI held that the allegations based on inquiries made in the third party s documents of Commission Agent and transporters cannot lead to the fact of clandestine activities. In the present case, the entire endeavor of the Revenue is based upon the documents recovered from the premises of M/s. Monu Steels read with the statement of their Director and by ignoring the statement of the Director of the present appellant - demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against order of Principal Commissioner in de novo proceedings, demand confirmation based on raw material supply, electricity consumption, and third-party records.

Analysis:

1. Background and Tribunal's Directions:
The appeal was filed against the order of the Principal Commissioner passed in de novo proceedings following a remand by the Tribunal. The appellant, engaged in manufacturing MS ingots, faced investigations based on the belief that raw material supplied by a commission agent was converted into the final product without duty payment. The Tribunal's directions emphasized the need for corroborative evidence and the requirement for the original authority to decide the issue afresh, allowing additional evidence if necessary.

2. De Novo Proceedings and Demand Confirmation:
In the subsequent de novo proceedings, the Principal Commissioner reduced the demand significantly but confirmed a portion based on entries in the records of the commission agent. The appellant contested this decision, arguing that reliance on third-party records without further investigations or corroborative evidence was unjustified. The Tribunal acknowledged the failure to comply with its directions and highlighted previous decisions where demands based solely on third-party records were set aside due to lack of evidence supporting clandestine removal allegations.

3. Legal Precedents and Lack of Corroborative Evidence:
The Tribunal cited various cases, such as Abha Power & Steel P. Ltd., Rudra Ventures Pvt. Ltd., and Raipur Forging Pvt. Ltd., where demands were rejected when based solely on third-party records. The Tribunal emphasized the insufficiency of private records without additional verification regarding procurement, transportation, and manufacturing processes. The absence of corroborative evidence and reliance on assumptions and presumptions were deemed insufficient to support allegations of clandestine removal.

4. Decision and Setting Aside the Impugned Order:
Considering the lack of compliance with the Tribunal's directions and the precedents highlighting the necessity of corroborative evidence, the Tribunal set aside the impugned order. The appeal was allowed, emphasizing the importance of substantive evidence and proper verification to uphold charges of clandestine activities. The decision was based on established legal principles and previous rulings rejecting demands solely based on third-party records.

This detailed analysis of the judgment highlights the key issues, legal principles, and precedents considered by the Tribunal in reaching its decision to set aside the order and allow the appeal.