2019 (1) TMI 964 - AT - Central Excise

Clandestine removal - MS Ingots - demand based on private records seized by the department from the premises of M/s Mono Steels - reliability on statements - Held that - No evidences have been recovered from the manufacturing premises of the appellant No. I regarding excess manufacture, clandestine clearance and excess purchases at the end of the buyers of the finished goods. The Department has also not strived to prove that as to how such a huge quantity have been manufactured and as to how such a huge quantity was ultimately sold by the appellant in the market - The Department has failed to adduce any other documents to corroborate the said recovered record. Further, the Revenue has not made any enquiries regarding manufacturing of excess quantities of finished goods as well as further sale of same in the market and has solely relied upon the entries made in the record of M/s Monu Steels for demanding central excise duty. Similarly for the record from M/s Kailash Traders as far as the raw material is concerned, Department couldn t adduce any other corroborative piece of evidence. The law i.e. as to whether the third party record 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 the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods. Reliability on statements - Held that - The statement of various persons recorded during the course of investigation can only be taken for consideration, if either there is a full proof corroboration or if the same has been confirmed under the cross examination during the course of adjudication - in the present case, neither there is a full corroboration of alleged excess manufacture or clearance or purchases of finished goods and raw material nor the statements of key persons has been established by cross-examination during the course of adjudication. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Confirmation of central excise duty and penalties based on alleged clandestine removal of finished goods.
- Reliance on documents seized from third-party premises as primary evidence.
- Lack of corroborative evidence for excess manufacture and clearance of goods.
- Admissibility of third-party records without sufficient evidence of clandestine activities.
- Applicability of legal precedents in similar cases.

Analysis:
1. Confirmation of Central Excise Duty and Penalties:
The appellant, engaged in manufacturing steel ingots, contested the duty demand and penalties imposed by the Adjudicating Authority based on alleged clandestine removal of finished goods. The appellant argued that the evidence relied upon, primarily private records seized from third-party premises, lacked corroboration of excess manufacture and clearance without payment of duty. The appellant contended that the duty demand solely based on a confessional statement without concrete evidence of transportation, excess manufacture, or identification of buyers was legally unsustainable.

2. Reliance on Third-Party Documents:
The Tribunal noted that the Department primarily relied on documents seized from third-party premises, namely M/s Mono Steels and M/s Kailash Traders, without recovering evidence from the manufacturing premises of the appellant regarding excess manufacture and clearance of goods. The Tribunal emphasized the lack of proof regarding the manufacturing and sale of a significant quantity of goods, questioning the reliability of statements recorded without full corroboration or cross-examination during adjudication.

3. Lack of Corroborative Evidence:
The Tribunal highlighted the absence of additional documents or investigations to substantiate the recovered records from third parties, indicating a failure to establish excess quantities of finished goods, raw material purchases, or transportation details. The Department's case was solely based on entries in third-party records, lacking concrete evidence of clandestine activities by the appellants.

4. Admissibility of Third-Party Records:
In line with legal precedents and judgments, the Tribunal emphasized that findings of clandestine removal cannot be upheld solely based on third-party documents without substantial evidence of clandestine manufacture and removal of goods. Citing relevant cases, the Tribunal reiterated the requirement for clinching evidence to support allegations of clandestine activities, emphasizing the need for corroborative evidence beyond third-party records.

5. Decision and Precedents:
Applying the established legal principles and precedents, the Tribunal set aside the duty demand and penalties imposed, concluding that the reliance on third-party records without sufficient corroborative evidence was not tenable. By allowing the appeals, the Tribunal upheld the importance of concrete evidence in cases involving allegations of clandestine activities, emphasizing the need for thorough investigations and substantiating evidence to confirm duty demands and penalties.

This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal, the arguments presented by the appellant, and the legal principles applied to reach the decision to set aside the duty demand and penalties.