2019 (11) TMI 308 - HC - Central Excise

Discard of documents relied upon by the Enforcement Authorities - Clandestine removal - Gutkha - no material evidence found in support of allegation - Whether CESTAT had committed an error in discarding the documents relied upon by the Enforcement Authorities and in that regard whether such decision is contrary to the provisions as contained in Section 36(B) of the Act? HELD THAT - It is evident that the Tribunal has found that the Commissioner has found clandestine clearance of gutkha by the assessee involving duty of 4.60 crores on the basis of copies of railway receipts as well as the material retrieved from the computer seized from the premises of M/s. Dwaraka Mai Associates viz., the dealer of the assessee - From perusal of the record maintained by the dealer of the assessee, the Commissioner has held that the daily sales of Hira brand gutkha did not match with the invoices issued for the sale of gutkha by the assessee. There has to be clinching evidence in the matter of purchase of raw material, use of electricity, removal of final product and its sale in order to prove that the material was removed in a clandestine manner with a view to evade duty. The aforesaid material is not available on record - The Revenue has failed to produce any cogent evidence in respect of the aforesaid aspect of the matter to prove the allegation against the assessee. The tribunal has, therefore, rightly reversed the order passed by the Commissioner and has allowed the appeals of the assessee. It is equally well settled legal proposition that this court in an appeal under section 35G of the Act cannot re-appreciate the evidence unless and until the evidence recorded by the tribunal are shown to be perverse. Learned counsel for Revenue was unable to point out as to which evidence adduced by the revenue has been discarded by the Tribunal. The question of law, in fact, framed by this Court does not arise for consideration in the fact situation of the case as entire evidence adduced by Revenue has been considered by the Tribunal - Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether CESTAT erred in discarding relied-upon documents contrary to Section 36(B) of the Act?

Analysis:
The appeals filed by the Revenue under Section 35G of the Central Excise Act, 1944 were admitted by the Karnataka High Court based on the substantial question of law regarding the CESTAT's alleged error in discarding documents relied upon by the Enforcement Authorities. The case involved the clandestine clearance of 'Hira' brand gutkha without duty payment, leading to searches, seizures, and subsequent show cause notices to the assessee for duty demand, interest, and penalties.

2. Whether the Tribunal's decision to reverse the Commissioner's order was justified?

The Commissioner had imposed duty, interest, and penalties on the assessee based on seized documents, statements, and railway receipts indicating evasion. The assessee appealed to the Tribunal, which overturned the Commissioner's order. The Tribunal found discrepancies in the evidence presented by the Revenue, including railway receipts not directly linked to the assessee and lack of conclusive proof of clandestine clearance.

3. Whether the Tribunal's decision was based on a meticulous evaluation of evidence?

The Tribunal meticulously analyzed the evidence, including computer print-outs and expenses statements, concluding that the Revenue failed to provide substantial proof of duty evasion by the assessee. The Tribunal highlighted the absence of crucial evidence like raw material purchase, electricity usage, and final product sale to establish clandestine removal for duty evasion.

4. Whether the High Court could re-evaluate evidence in the appeal under Section 35G?

The High Court emphasized that unless the evidence considered by the Tribunal was proven to be perverse, re-evaluation was not permissible under Section 35G. The Court found that the Tribunal had thoroughly examined all evidence presented by the Revenue and concluded that the substantial question of law framed did not apply to the case. Consequently, the appeals were dismissed with no costs awarded.

In conclusion, the Karnataka High Court dismissed the Revenue's appeals, upholding the Tribunal's decision to overturn the Commissioner's order due to lack of concrete evidence supporting the allegations of duty evasion by the assessee. The Court emphasized the importance of substantial evidence and meticulous evaluation in such cases, highlighting the limitations on re-evaluating evidence in appeals under Section 35G of the Act.