2018 (7) TMI 521 - AT - Central Excise

Clandestine removal - raw-material as well as of the finished goods - tangible evidences not present - Held that - There is a plethora of judgments to hold that to stand upon the charges as that of clandestine removal, there has to be some clinching evidence and the demand cannot be confirmed based on presumptions and assumptions. In the present case the allegations against the appellants have been levelled on the basis of some documents recovered from the premises of M/s. PIL. There is nothing on record which may show any effort of the Department that the recovered documents ever got tallied from the documents available with the appellants - Apparently or admittedly, there is no raid conducted in the premises of the appellant nor any documents got recovered from their premises. It is also evident on record that appellants were not given any opportunity to cross-examine Mr. Pankaj Agrawal, Director of M/s. PIL. These facts are sufficient for us to arrive at a firm opinion that the documents recovered from a third premises were never got corroborated, hence can not be lead into evidence at least for proving the alleged guilt of the appellants beyond reasonable doubts. The authorities have wrongly held lack of evidence on the part of the appellant - the burden to prove the allegations of clandestine removal was very much upon the Department - demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Allegations of clandestine removal of raw-material and finished goods without payment of duty; Lack of opportunity for cross-examination; Reliability of evidence recovered from a third party; Burden of proof on the Revenue.

Analysis:

Allegations of Clandestine Removal:
The case involved allegations of clandestine removal of raw-material and finished goods against the appellants. The Tribunal emphasized the need for concrete evidence to prove such serious charges. Referring to a judgment by the Hon'ble High Court of Allahabad, it was highlighted that mere statements without tangible evidence were insufficient to establish clandestine removal. The Tribunal noted that the charges against the appellants were based on documents recovered from a third party, without any effort to corroborate the evidence with the appellants' records. It was concluded that the Revenue failed to provide substantial evidence to prove the alleged clandestine removal beyond reasonable doubt.

Lack of Opportunity for Cross-Examination:
Another crucial aspect was the lack of opportunity given to the appellants to cross-examine Mr. Pankaj Agrawal, the Director of the alleged buyer. The Tribunal considered this as a significant procedural flaw, stating that the documents recovered from a third party could not be used as evidence without proper corroboration. The failure to allow cross-examination undermined the reliability of the evidence presented by the Revenue.

Reliability of Evidence from a Third Party:
The Tribunal highlighted the importance of following proper procedures, akin to criminal adjudication, in cases of alleged clandestine removal. Citing a judgment by the Hon'ble High Court of Punjab & Haryana, it was emphasized that statements recorded without the opportunity for cross-examination should not be relied upon. The Tribunal criticized the authorities for ignoring this procedural lapse and for basing their decision solely on the statement of a third party, without sufficient corroborative evidence.

Burden of Proof on the Revenue:
Lastly, the Tribunal reiterated that the burden of proof lay with the Revenue to substantiate allegations of clandestine removal. It was noted that the authorities below had failed to appreciate this burden and had erroneously concluded against the appellants based on inadequate evidence. Consequently, the Tribunal set aside the orders, deeming them unsustainable, and allowed the appeals in favor of the appellants.

This detailed analysis of the judgment underscores the significance of concrete evidence, procedural fairness, and the burden of proof in cases involving allegations of clandestine activities and duty evasion.