2018 (7) TMI 11 - AT - Central Excise

Clandestine removal - M.S. Ingots - third party evidences - whether the Principal Commissioner vide its impugned order dated 08.01.2018 is justified in confirming the demand of Central Excise duty of ₹ 10,68,667/- along with interest and penalty in respect of clandestine removal of 360.240 mt of M.S. Ingots recovered from the appellant M/s. Balaji Stuctural (India) Ltd., Raipur of which the appellant-Suresh Agarwal is Director? Held that - In the impugned order nowhere it has been discussed as to how the demand to duty of ₹ 10,68, 667/- 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 ₹ 16,04,75,554/- 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 360.240 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. Suresh Agarwal, Director is also set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demand of Central Excise duty for clandestine removal of M.S. Ingots.
2. Justification of penalties imposed based on the evidence of clandestine removal.

Analysis:
Issue 1: The question in these appeals was whether the Principal Commissioner was justified in confirming the demand of Central Excise duty for clandestine removal of M.S. Ingots. A show cause notice was issued regarding suppressed production and clandestine removal of M.S. Ingots without issuing invoices or following Central Excise procedures. The demand was based on records recovered from a third party, and the appellant contested the validity of the evidence. The Principal Commissioner dropped part of the demand but confirmed a portion related to clandestine removal.

Issue 2: The appellant argued that the department lacked sufficient evidence to proceed against them based solely on a third party's diary entry without corroboration. The department cited actions against other manufacturers as justification, but the appellant disputed the lack of corroborative evidence regarding the movement and buyers of the alleged goods. The Tribunal highlighted that findings of clandestine removal cannot be upheld solely based on third party documents without concrete evidence. Previous judgments were referenced to support the requirement of corroborative evidence. Ultimately, the appeals were allowed, and the impugned order, along with penalties, was set aside due to insufficient evidence and lack of corroboration.

In conclusion, the Tribunal set aside the demand for Central Excise duty and penalties, emphasizing the necessity of corroborative evidence in cases of clandestine removal. The decision was based on established legal principles and previous judgments, highlighting the importance of concrete evidence to support allegations of wrongdoing.