2019 (4) TMI 649 - AT - Central Excise

Clandestine removal - readymade garments - demand based on assumptions and presumptions - demand on the basis of outward register maintained by uneducated contractual employees employed by security contractor - Held that - There is no dispute regarding value of the clearances effected by Respondent Assessee, Octave Apparels, and the only dispute is regarding bifurcation of these clearances into knitted garments and non-knitted garments. The Department in the Show Cause Notice quantified assessable value of dutiable goods i.e. non knitted garments at 1,92,83,241/- involving Central Excise duty amounting to ₹ 25,86,133/- whereas Respondents contended total clearance of dutiable goods was below the SSI limit. Department had all the details of goods cleared from the Respondent s premises viz name of buyer, quantity of items sold, mode of transportation and there was nothing to record to show that any investigation was made form the buyers of the goods or the transporters to substantiate the allegation of clandestine removal. The Commissioner further observed that the Department / Adjudicating Authority without causing any investigation from the buyers/transporters to verify the entries made in the said register to ascertain Respondent s contentions that the register cannot be relied as the same contained the entries in respect of cancelled gate passes against which no sales were effected, returned goods and trade samples held that the Department has failed to prove its case. There is no dispute that the gatekeepers / security staff were contractual persons employed by security contractor. The register maintained by them was not under the instructions of the Respondent assessee and the said register was not supervised and/or scrutinized by the Respondent assessee. Thus, there is nothing wrong in the Commissioner s observation that confirmation of demand relying on those registers was incorrect. The Revenue s contention on this count also is unimpressive and merits rejection. There is no allegation that the Respondent cleared any material without raising invoices but only charge is that the goods cleared as knitted garments or fabric were in fact non-knitted garments and that Respondents wrongly claimed some entries to be those related to return of goods or clearance of samples - Without any investigation from buyers of the goods or transporters to conclusively ascertain that goods were knitted or non-knitted and to verify the veracity of the Respondent s claim in respect of return of goods / clearance of sample confirmation of demand on the basis of outward register that too not maintained by the Respondent s office but by the Security personnel engaged by security contractors cannot be sustained. Appeal dismissed - decided against Revenue.

Issues Involved:

1. Assumptions and presumptions in demand confirmation.
2. Admission by the partner in voluntary statements.
3. Change in stance regarding garment classification.
4. Reliance on the outgoing register for demand confirmation.
5. Entries in the outgoing register without corresponding statutory records.
6. Statements explaining entries in the outgoing register.
7. Applicability of case law relied upon by the Commissioner (Appeals).

Issue-wise Detailed Analysis:

1. Assumptions and Presumptions in Demand Confirmation:
The Revenue argued that the Commissioner (Appeals) wrongly concluded that the demand was confirmed merely on assumptions and presumptions without evidence. The Commissioner (Appeals) found that the Adjudicating Authority confirmed the demand based on assumptions without any investigation from the buyers to verify if the garments were knitted or non-knitted. The Commissioner (Appeals) noted the lack of documentary evidence or authenticated technical literature to support the Adjudicating Authority's conclusions and relied on the Supreme Court judgment in M/s Oudh Sugar Mills, which held that demands cannot be based on assumptions.

2. Admission by the Partner in Voluntary Statements:
The Revenue contended that the Commissioner (Appeals) ignored an admission by Harsh Kumar, a partner, in his voluntary statement that invoices for knitted jackets mentioned "knitted," while woven jackets were described as "jackets." The Commissioner (Appeals) did not address this admission, which the Revenue argued was crucial evidence.

3. Change in Stance Regarding Garment Classification:
The Revenue argued that the Commissioner (Appeals) failed to consider earlier admissions by the party regarding the garments being woven and the subsequent change in stance without proof. The Commissioner (Appeals) did not address this inconsistency in the party's statements.

4. Reliance on the Outgoing Register for Demand Confirmation:
The Revenue claimed that the Commissioner (Appeals) erred in holding that the demand based on the outgoing register was wrongly confirmed. The Commissioner (Appeals) observed that the outgoing register was maintained by uneducated gatekeepers employed by a security contractor and was not supervised by the Respondent. The Commissioner (Appeals) found that the Department did not investigate the buyers or transporters to substantiate the allegations of clandestine removal, making the reliance on the outgoing register unsustainable.

5. Entries in the Outgoing Register Without Corresponding Statutory Records:
The Revenue argued that the Commissioner (Appeals) did not consider the 48 entries in the outgoing register that had no corresponding details in the statutory records. The Commissioner (Appeals) noted that the Department failed to investigate these entries and relied on judgments that held private records maintained by security personnel as unreliable without corroborative evidence.

6. Statements Explaining Entries in the Outgoing Register:
The Revenue contended that the Commissioner (Appeals) did not discuss the statement of Balbir Kumar, a partner, who explained the 48 entries as trade samples or defective pieces sent for repair. The Commissioner (Appeals) found that the Department did not investigate these claims and relied on judgments that required corroborative evidence for such entries.

7. Applicability of Case Law Relied Upon by the Commissioner (Appeals):
The Revenue argued that the case law relied upon by the Commissioner (Appeals) did not apply to this case. The Commissioner (Appeals) found that the Department did not investigate the buyers or transporters to verify the entries in the outgoing register, making the reliance on these entries unsustainable. The Commissioner (Appeals) relied on judgments that required corroborative evidence for private records maintained by security personnel.

Conclusion:
The Tribunal upheld the Commissioner (Appeals) order, finding no infirmity in the decision to quash the demand and penalties. The Tribunal dismissed the Revenue's appeals, noting that the demand was based on assumptions and unsupported by evidence, and the reliance on the outgoing register was unsustainable without corroborative evidence. The Tribunal emphasized that suspicion cannot replace proof and upheld the Commissioner (Appeals) findings that the Department failed to substantiate its allegations.

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