2018 (11) TMI 973 - AT - Central Excise

Clandestine removal - misutilization of exemption available to them in terms of Notification No.56/2002 - no manufacture of copper ingots, only fake documents issued - entire case of the Revenue is based upon the said four pages purportedly retrieved from the computer - Held that - The evidentiary value of such computer print outs is to be appreciated in terms of sub-section 2 of section 36B, which provides that the computer should be used regularly to store or process information and during the period in question there was regularly supply to the computer in the ordinary course of the said activities. Apart from the computer print outs, there is no other evidence produced by the Revenue on record - It is well established law and does not require the support of any precedent decision to observe that the allegations of clandestine removal are serious allegations and are required to be confirmed on the basis of positive and affirmative evidences - Inasmuch as nothing has been shown in the present case by the Revenue, there are no reasons to confirm the demand - the demand of ₹ 19,88,803/- along with interest and imposition of penalty is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Denial of Cenvat credit based on fraudulent invoices
2. Allegations of clandestine removal based on computer printouts
3. Confirmation of duty, interest, and penalties

Analysis:

Issue 1: Denial of Cenvat credit based on fraudulent invoices
The appellant, engaged in manufacturing copper products, availed Cenvat credit on copper ingots procured from M/s.V.K.Metals, Jammu. However, investigations revealed that M/s.V.K.Metals might have misutilized an exemption, leading to suspicions of fraudulent activities. Statements from the appellant's authorized signatory confirmed the receipt of copper ingots from M/s.V.K.Metals. A show cause notice was issued, denying Cenvat credit and confirming duty on the basis of alleged fraudulent invoices. The original adjudicating authority upheld the denial and confirmed duty, which was also affirmed by the Commissioner (Appeals).

Issue 2: Allegations of clandestine removal based on computer printouts
The confirmation of duty against the appellant was primarily based on computer printouts seized during a search operation. The appellant argued that the documents were not prepared by responsible personnel and did not relate to their manufacturing activities. They contended that the conditions under section 36B of the Central Excise Act were not met to uphold the evidentiary value of the printouts. The appellant also highlighted that the computer had undergone extensive repairs, questioning the reliability of the data. The Tribunal emphasized the need for corroborating evidence in cases of clandestine removal and noted the lack of substantial proof beyond the computer printouts.

Issue 3: Confirmation of duty, interest, and penalties
The Tribunal's decision in a related case involving M/s.V.K.Metals, where allegations of clandestine activities were dropped, directly impacted the present case. As M/s.V.K.Metals were found to be a legitimate manufacturing unit availing exemptions correctly, the grounds for denying Cenvat credit to the appellant were deemed invalid. Consequently, the Tribunal set aside the demand for duty, interest, and penalties against the appellant. The lack of additional evidence beyond the contested computer printouts led to the dismissal of the allegations of clandestine removal, resulting in the favorable outcome for the appellant.

In conclusion, the Tribunal allowed both appeals, providing consequential relief to the appellants by setting aside the demands for duty, interest, and penalties. The decision highlighted the importance of substantial evidence in cases of alleged fraudulent activities and clandestine removal, emphasizing the need for corroborating proof to uphold such serious allegations.