2018 (8) TMI 791 - AT - Central Excise

Clandestine removal - MS ingots - penalty - the entire case of the department is based upon the entries in the diary recovered from one Mr. S.K. Pansari (proprietor of M/s Monu Steels) and also on the statement of the said Mr. S.K. Pansari, without their being any corroborative evidence - Held that - In the impugned order nowhere it has been discussed as to how the demand of duty is sustainable in the absence of any clinching evidence of clandestine manufacture and removal of the goods. The entire demand is based upon the records recovered from Sh. S.K. Pansari proprietor of M/s Monu Steel. There is no evidence expect the said statement and private diary entry of 3rd party i.e. of Sh. S.K. Pansari which contains the name of the appellant. 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 can be made. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demand of Central Excise Duty for clandestine removal of MS ingots.
2. Reliability of evidence based on diary entries and third-party statements.
3. Requirement of corroborative evidence for establishing clandestine removal.
4. Legal precedent on the use of third-party records as evidence.

Analysis:
1. The judgment involves the confirmation of a demand for Central Excise Duty on M/s Maa Banjari Ispat Ltd. for clandestine removal of MS ingots, along with penalty on the director, Shri Dilip Agarwal. The impugned order by the Principal Commissioner was challenged in the appeal before the Appellate Tribunal CESTAT NEW DELHI.

2. The primary contention raised was the reliance on evidence derived from diary entries and the statement of a third party, Mr. S.K. Pansari, without sufficient corroborative evidence. The appellant argued that the department's case lacked corroborative evidence apart from the entries in the diary and the statement of Mr. Pansari, who did not appear for cross-examination.

3. The Tribunal scrutinized the statement of Shri Dilip Agarwal, which did not explicitly acknowledge the clearance of MS ingots. The appellant emphasized the absence of conclusive evidence linking the goods' movement from their premises to buyers or customers. It was argued that without such evidence, the demand for duty was not sustainable.

4. The judgment delved into legal precedents, citing cases where reliance on third-party documents alone was insufficient to establish clandestine removal without concrete evidence. The Tribunal highlighted the necessity of corroborative evidence to support claims of clandestine activities. Several decisions were referenced to emphasize the requirement for clinching evidence beyond third-party records.

5. Ultimately, based on the lack of corroborative evidence and in alignment with previous tribunal decisions on similar cases, the appeals were allowed, and the impugned order was set aside. Consequently, the penalty imposed on Shri Dilip Agarwal was also revoked. The judgment emphasized the importance of substantial evidence in cases involving allegations of clandestine removal to uphold the principles of natural justice and fair proceedings.