2018 (8) TMI 165 - AT - Central Excise

Clandestine removal - raw-material as well as the finished goods - demand based on third party evidence - 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 - The Hon ble High Court of Allahabad in the case of Continental Cement Co. Vs. Union of India 2014 (9) TMI 243 - ALLAHABAD HIGH COURT has held that the charge of clandestine removal is a serious charge, which is required to be proved by the Revenue by tangible and the sufficient evidence. It was clarified by the Hon ble that mere statements of buyers that too based on memories were not sufficient without support of any documentary evidence. The entire case of the Revenue is based upon the records recovered from M/s Monu Steels. Even in these records, the appellant s name has not been spelt correctly and it is based upon the statement of the representative of M/s Monu Steels that the Revenue entertained an assumption about it to refer to the appellant s clearances - the Revenue has not made any enquiries from the buyer s Steels and has solely relied upon the entries made in the record of M/s Monu Steels - Any demand and the proportionate penalty on the Director of the manufacturer is not sustainable. Demand and imposition of penalty qua M/s Kailash Traders, the supplier of sponge iron (the raw material) to the manufacturer - Held that - Once the demand is not sustainable against the manufacturer, it does not lie against the supplier of raw material especially for want of any evidence corroborating the allegations - demand set aside. Penalty on Mr. Sunil and Mr. Ashok - scope of SCN - Held that - The facts as brought to the notice i.e Mr. Sunil is not the noticee of impugned SCN and that Mr. Ashok is not the Director of appellant, are perused as correct - Since it is the settled law that the adjudicating authority cannot be go beyond the Show Cause Notice, the order imposing penalty upon him is held to be a definite error in the order - penalties set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Alleged clandestine removal of ingots, imposition of penalties based on third-party evidence, validity of demand against manufacturer and supplier, imposition of penalties on individuals not mentioned in the Show Cause Notice.

Analysis:

1. Alleged Clandestine Removal of Ingots:
The case involved allegations of clandestine removal of ingots against the manufacturer based on intelligence gathered during raids. The Show Cause Notices were served alleging clandestine removal by the manufacturer, leading to the confirmation of demand, interest, and penalties. The appellant denied the allegations, arguing lack of evidence and third-party reliance. The Tribunal considered the evidence, including statements and recovered documents, to assess the validity of the allegations.

2. Imposition of Penalties Based on Third-Party Evidence:
The appellant contested the imposition of penalties based on third-party evidence, highlighting discrepancies in the documents and lack of direct evidence linking them to the alleged clandestine removal. The Tribunal examined the legal precedents cited by the appellant to determine the admissibility of third-party records as evidence in establishing clandestine activities. The judgment emphasized the necessity of concrete evidence to support such serious charges.

3. Validity of Demand Against Manufacturer and Supplier:
The Tribunal scrutinized the demand against both the manufacturer and the supplier of raw material, considering the evidence presented and the lack of corroborative proof. The judgment referenced previous cases and legal principles to evaluate the sustainability of the demand and penalties imposed on the parties involved. The decision emphasized the importance of tangible evidence in proving allegations of clandestine activities.

4. Imposition of Penalties on Individuals Not Mentioned in the Show Cause Notice:
The appellant raised concerns regarding the imposition of penalties on individuals not specifically named in the Show Cause Notice. The Tribunal reviewed the legal framework governing penalty imposition and the necessity for adherence to procedural requirements. The judgment highlighted errors in imposing penalties on individuals not properly identified in the notice, emphasizing the need for procedural correctness in penalty determinations.

5. Final Decision and Conclusion:
After a comprehensive analysis of the evidence, legal arguments, and precedents cited, the Tribunal concluded that the allegations of clandestine removal were not substantiated with sufficient proof. The judgment set aside the impugned orders, allowing the appeals and providing consequential relief to the appellants. The decision underscored the significance of concrete evidence and adherence to procedural norms in adjudicating cases involving serious charges like clandestine activities.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT New Delhi covers the issues related to alleged clandestine removal, penalties based on third-party evidence, validity of demands against parties, and procedural correctness in penalty imposition.