2018 (6) TMI 1421 - AT - Central Excise

Clandestine removal - MS Ingots - third party evidences - whether the Principal Commissioner vide its impugned order dated 28.12.2017 is justified in confirming the demand of Central Excise duty of 4, 65, 570/- along with interest and penalty in respect of clandestine removal of 154.580 mt of M.S. Ingots recovered from the appellant M/s. Sairam Steels Pvt. Ltd. Raigarh (CG) of which the appellant-Pawan Kuram Agarwal is Director? Held that - In the impugned order nowhere it has been discussed as to how the demand to duty of 4, 65, 570/- is sustainable in the absence of any clinching evidence of clandestine manufacture and removal of the goods and also in view of the fact that the said amount is already included in the duty demand of 6, 38, 05 258/-which has been dropped in the impugned order by the ld. Principal Commissioner. There is absolutely no evidence on record to show that the appellant has cleared 154.580 MT of M.S. Ingots. The entire demand is based upon the records recovered from Sh. S.K. Pansari proprietor of M/s. Monu Steel. The law as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal in the absence on any corroborative evidence is well settled. Only on the basis of statement of third party no demand could be made. The penalty imposed on the Sh. Pawan Kumar Agarwal Director is also set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Demand of Central Excise duty for clandestine removal of M.S. Ingots
- Imposition of penalties under various provisions of Central Excise Act
- Reliability of third party records as evidence

Analysis:
1. Demand of Central Excise Duty: The case involved the confirmation of a demand of Central Excise duty amounting to ?4,65,570/- for the clandestine removal of 154.580 MT of M.S. Ingots. The appellant, a director of the company, was accused of suppressing production and removing goods without issuing invoices or paying duty. The demand was based on records recovered from a third party, Sh. S.K. Pansari, proprietor of M/s. Monu Steel. The appellant contested the demand, arguing that there was no concrete evidence of clandestine manufacture and removal of the goods. The tribunal noted that the duty amount in question was already included in a larger demand that was dropped, raising doubts about the sustainability of the ?4,65,570/- demand.

2. Imposition of Penalties: The appellant was also facing penalties under various provisions of the Central Excise Act for alleged suppression of production and clandestine removal of goods. The penalties were linked to the duty demand and were based on the same evidences. The tribunal considered the lack of corroborative evidence and the appellant's denial of involvement with the third party mentioned in the records. It highlighted the importance of clinching evidence in upholding penalties for clandestine activities. Ultimately, the tribunal set aside the penalties imposed on the director, emphasizing the insufficiency of evidence to support the allegations.

3. Reliability of Third Party Records: The central issue revolved around the reliance on third party records, specifically the diaries of Sh. S.K. Pansari, as the primary evidence for establishing clandestine activities. The appellant challenged the authenticity and credibility of these records, arguing that no corroborative evidence was presented to prove the movement of goods or the involvement of the appellant in clandestine activities. The tribunal referred to previous judgments that emphasized the need for concrete evidence beyond third party statements to uphold findings of clandestine removal. Citing precedents, the tribunal consistently ruled in favor of appellants when demands were solely based on third party records without additional corroboration.

In conclusion, the tribunal allowed the appeals and set aside the impugned order, including the demand for Central Excise duty and the penalties imposed on the director. The decision underscored the importance of substantial evidence in proving allegations of clandestine activities and reiterated the legal principle that third party records alone may not suffice without corroborative evidence.