2018 (9) TMI 1267 - AT - Central Excise

Clandestine removal - third party evidences - charge of clandestine clearance has been raised by Revenue on the basis of the evidence in the form of diaries maintained by Sh. S. K. Pansari, Commission Agent - Held that - The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - the findings of clandestine removal cannot be upheld based upon only the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmation of Central Excise duty demand and penalty imposition based on third-party evidence and statements.

Analysis:
The appeal was filed against an Order-in-Original confirming a Central Excise duty demand of ?44,24,997 on the appellant and a penalty of ?2,00,000 on the Director, while dropping a demand of ?8.89 crore. The demand arose from a common investigation by Central Excise officers based on entries in a diary recovered from a consignment agent and statements of involved individuals. The Director did not admit to clandestine clearance mentioned in the diary. The adjudicating authority confirmed the demand citing the Director's acknowledgment, despite lack of cross-examination of the consignment agent. The appellant argued that Revenue lacked corroborative evidence and cited cases where similar demands were disallowed due to reliance solely on third-party evidence.

The Revenue's case relied on third-party documents and statements, alleging clandestine clearance based on a consignment agent's diaries and statements. However, the Directors did not admit to the details in the diaries or the charge of clandestine clearance. Legal precedents were cited to establish that findings of clandestine removal cannot be upheld solely on third-party documents without concrete evidence of clandestine manufacture and removal. Previous Tribunal decisions in similar cases supported setting aside demands and penalties in identical circumstances.

Considering the lack of corroborative evidence and following established legal principles, the impugned order confirming the demand and penalty was set aside, and the appeal was allowed. The judgment emphasized the necessity of clinching evidence to support allegations of clandestine activities, highlighting the insufficiency of third-party records alone in such cases.