2018 (10) TMI 314 - AT - Central Excise

Clandestine removal - demand based on the basis of unexplained loose sheets - whether in the facts and circumstances of the case, charge of clandestine removal is sustainable against the appellants or not? Held that - In this case during the course of investigation, in the factory premises of the appellant, nothing incriminating was found. Moreover, the stocks of raw material as well as finished goods has also found tallied with the statutory records. There are certain loose sheets recovered from the residence of the Director of the appellant company and on the basis of this, the case has been made out against the appellant. On going through the said loose sheet, it is found that some name i.e. M. Vijayvada is written thereon but to ascertain the truthness of said clearance, no effort has been made by the Revenue to investigate or to find out who is M. Vijayvada. If that effort could have been done, then truth could have been revealed. Simply, on the basis of these loose sheets and without any corroborative evidence, i.e. from where the raw material has been procured, how the goods were transported and how much electricity was consumed it cannot be alleged that the appellant is engaged in the activity of clandestine removal of goods. Merely, the corroborative statement of the Director of the appellant company cannot be the basis in the clandestine removal of the goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of duty, interest, and penalty based on alleged clandestine removal of goods without invoice issuance.

Analysis:
The case involved an appeal against an order confirming a duty demand of ?7,11,718 along with interest and penalty, and imposing a penalty of ?50,000 on the co-appellant, the Director of the company. The issue stemmed from a search conducted due to suspicions that the appellants were availing SSI exemption despite their turnover exceeding ?2 crores. Although nothing incriminating was found at the factory premises, certain unexplained loose sheets discovered at the Director's residence led to allegations of clandestine removal of goods without invoice issuance. The appellants contested these allegations, arguing that the loose sheets did not provide sufficient evidence of clandestine activities, especially in the absence of corroborative evidence regarding procurement, sales, transportation, electricity consumption, and production capacity. The Director's son even submitted an affidavit explaining the sheets, but it was disregarded. The appellant relied on legal precedents to support their stance.

The Revenue, however, contended that the Director had admitted the loose sheets' connection to clandestine activities during the investigation and was willing to pay duty, making his statement admissible as evidence. The Tribunal considered both parties' arguments and focused on determining the sustainability of the charge of clandestine removal against the appellants. Despite the loose sheets, the Tribunal found no incriminating evidence at the factory premises, and the statutory records matched the stocks of raw materials and finished goods. Notably, the loose sheets lacked crucial details like the source of raw materials, transportation methods, and electricity consumption. The Tribunal emphasized the necessity of corroborative evidence and cited a precedent where incriminating statements without corroboration were deemed inadmissible.

Ultimately, as the Revenue failed to provide corroborative evidence supporting the clandestine removal charge, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeal with any consequential relief. The judgment highlighted the importance of substantiating allegations with concrete evidence to establish charges of clandestine activities conclusively.