2020 (1) TMI 418 - AT - Central Excise

Clandestine removal - demand on the basis of third party records - corroborative evidences or not - time limitation - Section 11(4) of the Central Excise Act, 1944 - HELD THAT - It is found from the contents of the Show Cause Notice that the allegations are based on record maintained by a third party. The said record did not bear full name of the Appellant. But the authorities assumed that the short name mentioned in the documents was that of the Appellant. Therefore, the demand was made against the Appellant solely on presumption and assumption, without any corroborative evidence placed on record. No demand can be sustained solely on the basis of privately maintained, third party records. Merely because the investigating authorities found certain private records maintained by M/s. Pankaj Ispat Ltd. (PIL) and tacit admission of M/s. PIL regarding receipt of goods without cover of Invoice and without payment of Duty, from a party having similar name to that of the Appellant, cannot conclusively prove that the Appellant has indeed cleared finished products clandestinely, without payment of Duty, to M/s. PIL. Thus, it has been consistently held that demands of whatever nature cannot be confirmed solely on the basis of thirds party evidence/record - The Revenue has clearly failed to corroborate with reasonable accuracy the aspect of production and clandestine removal by the Appellant. Time limitation - HELD THAT - The matter was in the knowledge of the Revenue right from 19-9-2012, when the Statement of Shri Pankaj Agrawal, Director of M/s. PIL was recorded and the sole piece of evidence in the shape of his records, was withdrawn by the officers. Thereafter, a Statement dated 12-12-2013 of Ms. Permanand Sahu, Accountant and Authorized Signatory of the Appellant was also recorded under Section 14 of the Central Excise Act, 1944. The Revenue was sleeping on the issue and could not adduce a single piece of evidence against the Appellant and issued the Show Cause Notice as late as on 3-2-2016 - Therefore, the Show Cause Notice dated 3-2-2016 issued after four years is hopelessly barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Whether demand of Central Excise Duty based on third party records is sustainable and if the impugned notice is barred by limitation under Section 11(4) of the Central Excise Act, 1944.

Analysis:

1. Sustainability of Demand based on Third Party Records:
The central issue in the appeal was whether the demand of Central Excise Duty against the Appellant, amounting to a specific sum, was sustainable solely on the basis of third party records. The Show Cause Notice alleged clandestine removal of goods by the Appellant, but the records did not bear the full name of the Appellant. The authorities made assumptions based on a short name in the documents, without corroborative evidence, leading to a demand made against the Appellant purely on presumption and assumption.

2. Precedent Cases and Legal Interpretation:
The judgment referred to precedent cases such as Raipur Forging Pvt. Ltd. and Commissioner of C. Ex., Indore v. Prag Pentachem Pvt. Ltd. to emphasize that demands cannot be confirmed solely on third party evidence. These cases highlighted the importance of corroboration and the unreliability of third party records as the sole basis for deciding against an assessee. The judgment reiterated that demands of any nature should not be confirmed solely on third party evidence or records.

3. Limitation under Section 11(4) of the Central Excise Act, 1944:
The judgment also addressed the issue of limitation, pointing out that the Revenue had failed to adduce any evidence against the Appellant for a significant period. The Show Cause Notice was issued after a considerable delay from the initial knowledge of the matter by the Revenue, rendering it hopelessly barred by limitation. The delay in issuing the notice was a crucial factor in determining the validity of the demand.

4. Failure to Corroborate Evidence:
The judgment highlighted the Revenue's failure to substantiate the transportation of raw materials or the payments made by the Appellant to the supplier and transporter. There was a lack of concrete evidence supporting the allegations of clandestine removal by the Appellant. The absence of any caught consignments en-route further weakened the case against the Appellant.

5. Decision and Relief Granted:
After considering the arguments and examining the records, the Tribunal concluded that the demand of Duty was not sustainable. Consequently, there was no basis for the recovery of interest or imposition of penalties on the Appellant. The appeal was allowed, providing consequential relief to the Appellant in accordance with the law.

In conclusion, the judgment focused on the lack of substantial evidence, the importance of corroboration in establishing claims, and the significance of adhering to statutory limitations in issuing notices and demanding duties.