2020 (6) TMI 659 - AT - Central Excise

Clandestine manufacture and removal - finished goods, Iron Steel Ingot - period from March, 2007 to March, 2008 - demand based on documents recovered and statements recorded - HELD THAT - The entries in the loose sheet might have created doubt in the minds of the Revenue, but it could not have been taken as a piece of evidence by itself. It would, at best, only create suspicion to further investigate the matter. Other evidence regarding procurement of raw material, manufacture of goods by engaging labour, usage of electricity, dispatch and transport of final goods, destination of final goods and receipt of sale proceeds etc, could have probably substantiated the allegation even if not proved with arithmetical accuracy. No such evidence has been produced by the revenue - In such circumstances, it cannot be held that the clandestine removal is proved, if not beyond doubt. The allegation/observation of suppression of production and clandestine removal is a serious allegation and it has to be established by the investigation by affirmative and cogent evidence, which is absent in the Order in-original except relying upon such documents and entries there in, which has been disputed by the Appellant. Since the department has not adduced evidence to establish suppression of production, evidence of excess receipt of raw materials and clandestine removal of the goods with reference to any enquiry made with the buyers, supplier of the raw materials, confessional statement of transporters about transport of goods etc. the demand is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Alleged clandestine removal of excisable goods, demand of Cenvat Duty, imposition of penalties, reliance on seized documents and statements, violation of natural justice in adjudication process.

Analysis:
1. The Appellant, a manufacturer of Iron & Steel Ingot, faced a demand notice for Cenvat Duty of ?73,84,218.00 based on a simultaneous search conducted by DGCEI at their factory and others. The demand covered the period from March 2007 to March 2008, with penalties imposed on the company and its Director. The Adjudicating Authority confirmed the demand and penalties.

2. The Commissioner (Appeals) upheld the Order-in-Original, relying on various documents seized during the search, including computer-generated records, payment details, production records, weighment slips, and statements of staff members. The Appellant appealed against this decision.

3. The Appellant argued that the order was passed without considering their submissions, highlighting delays in issuing the notice and lack of examination/cross-examination of witnesses. They contested the reliance on retracted statements and uncorroborated evidence, citing judgments from High Courts.

4. The Appellant raised concerns about the identification of authors of seized documents, methodology of stock taking, coercion in recording statements, and lack of verification from transporters/consignees. They emphasized the need for proper investigation and examination of witnesses.

5. The Appellant contended that the demand was based on unverified documents, without substantial evidence of clandestine removal. They referenced tribunal decisions emphasizing the necessity of concrete proof in cases of alleged suppression and clandestine activities.

6. The Revenue defended the Lower Authorities' findings, supporting the penalties and demand based on the evidence available. The Tribunal reviewed the appeal records, statements, and cited judgments before making its decision.

7. The Tribunal noted that while certain documents raised doubts, they were insufficient as standalone evidence. Lack of proof regarding procurement, manufacturing, dispatch, and sale of goods undermined the Revenue's claims of clandestine removal. The demand lacked verification and substantial evidence, rendering it unsustainable.

8. Consequently, the Tribunal set aside the impugned Order, ruling in favor of the Appellant due to the absence of affirmative and cogent evidence supporting the allegations of suppression and clandestine removal. The appeal was allowed with consequential relief.

This detailed analysis covers the issues of alleged clandestine removal, demand of Cenvat Duty, penalties imposed, reliance on seized documents and statements, and the violation of natural justice in the adjudication process, providing a comprehensive overview of the judgment.