2019 (10) TMI 681 - AT - Central Excise

Clandestine removal - handmade biris - it is alleged that appellant, a manufacturer of handmade branded biris, have clandestinely stored 1,72,300 nos. of handmade biris (including 1,01,800 from adjoining premises) - alleged removal of 1,87,20,615 nos. of biris clandestinely on the basis of private records - HELD THAT - The quantum of biri entered in the stock account were cleared on payment of duty and the rest was cleared unaccounted, without payment of duty. Further, in the statement of the biri thekedar/ Abdul Salam he has stated that he has been supplying completely manufactured biris, and was not receiving any raw material from the appellant by way of job work. Further, other than the unaccounted stock of biris lying in the factory premises and in the adjoining premises of his uncle, there is no other evidence of clandestine manufacture and removal. There is no allegation that the stock of biri found in the adjoining premises (belonging to uncle of the appellant) were the branded goods of the appellant. Thus, the cogent explanation given by the appellant that such stock lying at the premises of his uncle were unbranded biris, purchased for trading, has not been found to be untrue. Further, there is no corroborative evidence brought on record by Revenue in support of clandestine manufacture and clearance of biris, although same was accepted by the Proprietor, who was not keeping good mental health. Further, it is also not the case of Revenue that the stock found in the factory premises was lying in complete manufactured stage, and properly packed with brand name. Confiscation with respect to 18,800 nos. of biris, which were found labelled and packed (10 biris x 20 katta x 94 pudas) upheld - So far the rest of the biris is concerned, the allegation is not substantiated and is based on presumption and assumption - appeal allowed in part.

Summary

Issues:
1. Whether the appellant clandestinely stored handmade biris and is liable for confiscation.
2. Whether the appellant is liable to pay duty for alleged removal of biris based on private records.

Analysis:
1. The issue in this appeal revolved around the clandestine storage of handmade biris by the appellant and the subsequent liability for confiscation. The appellant, a manufacturer of branded biris, was accused of storing 1,72,300 biris, including 1,01,800 from adjoining premises, seized under a panchnama. The revenue alleged suppression of production of 1,87,20,615 biris, resulting in duty non-payment of &8377;2,05,361. The appellant was also accused of improper entries in stock accounts and clandestine removal of biris. The previous orders confirmed duty, penalties, and confiscation, leading to the current appeal before the Tribunal.

2. The second issue focused on the duty liability for the alleged removal of biris based on private records. The appellant's counsel argued that unaccounted biris were found during physical verification, some of which were from adjoining premises purchased for trading. The appellant denied the alleged clandestine manufacturing and removal, attributing discrepancies to mental health issues and lack of evidence. The appellant contended that the seized biris from the uncle's premises were unbranded and not subject to duty payment. The Revenue relied on statements and documents to support their claims.

3. Upon review, the Tribunal found discrepancies in the allegations and evidence presented. The appellant's explanation regarding unbranded biris from the uncle's premises was accepted, leading to partial allowance of the appeal. Confiscation was upheld only for 18,800 properly labeled and packed biris, with duty, interest, and penalties confirmed for those biris. The Tribunal noted the lack of corroborative evidence for clandestine activities and emphasized the appellant's mental health issues in assessing the reliability of statements. The appeal was allowed in part, reducing the duty liability significantly based on the evidence and explanations provided.

4. The Tribunal's decision highlighted the importance of substantiated allegations and corroborative evidence in tax disputes. The judgment underscored the need for a thorough investigation and proper documentation to establish duty liabilities conclusively. The appellant's circumstances, including mental health issues, were considered in evaluating the reliability of statements and claims. The ruling provided clarity on the burden of proof in tax cases and the significance of credible evidence in determining liabilities and penalties.