2021 (4) TMI 347 - AT - Central Excise

Suppression of production and clandestine removal - bars/ rods - MS Ingots - entire case is on the basis of wrong allegation based upon the documents recovered from third party - HELD THAT - The documents recovered from the premises, based whereupon the show cause notice was issued, admittedly are in the form of loose parchies and in the form of hand written ledger book that too those got recovered from the premises of SSSRM. There appears no corroborative evidence to support those loose handwritten documents. Nor any evidence to connect them to the alleged guilt of the appellant. The statement of appellant, Smt. Sunita Devi, was recovered in June, 2005. There appears no acknowledgement on her part about she being involved in the alleged collusion with SSSRM for the alleged clandestine removal except for the raw material to have been delivered to SSSRM - the entire burden was that of the Department to prove that the appellant have been clearing the raw material from their premises and were getting the same delivered to SSSRM without discharging their liability. The demand against the appellant has been confirmed solely on the ground that the Director of the appellant could not indicate any reason as to why the entries in the private record of SSSRM mention appellant s name, the same finding are definitely presumptive finding. The order is not discussing any documents of the appellant proving the alleged clandestine removal on part of the appellant. The Adjudicating Authority has merely relied upon the statement of the Director. Resultantly the confirmation of demand is merely based on third party evidence. In the present case also there is no evidence either from the transporter or inquiry with respect to the output of SSSRM. In such circumstances, the allegation of clandestine clearance even for the quantity as that to 201.165 MT has wrongly been confirmed - the demand even against a smaller quantity of 201.165 MT of ingots though much larger quantity of 9551.278 MT of ingots was otherwise alleged to have clandestinely removed, has wrongly been confirmed. Time Limitation - HELD THAT - Apparently and admittedly appellant was regularly filing the returns. There is nothing produced on record by the Department to show any positive act on part of the appellant which may amount to suppression of relevant facts. Resultantly, the demand for a period of more than one year could not have been made. Department could not have invoked the extended period of limitation. Show cause notice is therefore held to be barred by time. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of duty demand based on evidence from third party premises.
2. Invocation of extended period of limitation for demand.
3. Insufficient evidence for confirming clandestine removal allegations.
4. Consideration of relevant case laws in deciding the appeal.

Issue 1: Confirmation of duty demand based on evidence from third party premises
The appellant, a manufacturer of M. S. Ingots, was issued a show cause notice demanding duty payment of &8377; 5,54,829 on 201.165 MT of MS Ingots. The notice was based on documents recovered from another party's premises, alleging clandestine removal. The appellant argued that there was no evidence against them, and the demand should be set aside as it relied solely on documents from a third party. The Tribunal observed that there was no corroborative evidence connecting the appellant to the alleged guilt, and the confirmation of demand based on presumptive findings from third party evidence was not sustainable. Citing legal precedent, the Tribunal held that demands based on presumptions without tangible evidence cannot be upheld. The demand against the appellant was deemed wrongly confirmed due to lack of conclusive evidence.

Issue 2: Invocation of extended period of limitation for demand
The appellant contended that there was no suppression of facts on their part, as they regularly filed excise returns, and the Department failed to produce any evidence of suppression. The Tribunal noted that there was no positive act by the appellant amounting to suppression, and the extended period of limitation could not have been invoked. Consequently, the show cause notice was held to be time-barred, and the adjudication based on it was deemed unsustainable. The demand for a period of more than one year was considered invalid due to lack of evidence supporting suppression.

Issue 3: Insufficient evidence for confirming clandestine removal allegations
The Tribunal found that the confirmation of demand against the appellant was solely based on the inability of the Director to explain entries in private records of another party mentioning the appellant's name. This finding was considered presumptive, as there was no discussion of any documents proving clandestine removal by the appellant. The Tribunal emphasized the requirement of tangible evidence to prove charges of clandestine removal, citing a judgment that highlighted the need for sufficient evidence beyond mere statements or assumptions. In this case, the lack of evidence from transporters or inquiries regarding the output of the other party led the Tribunal to conclude that the allegation of clandestine clearance against the appellant was wrongly confirmed.

Issue 4: Consideration of relevant case laws in deciding the appeal
The Tribunal referred to legal precedents, including a decision by the Hon'ble Rajasthan High Court, to support its findings. It emphasized the necessity of tangible evidence and the invalidity of demands based on presumptions or insufficient proof. Relying on established case laws, the Tribunal concluded that the demand against the appellant, even for a smaller quantity than alleged, was wrongly confirmed. The order under challenge was set aside, and the appeal was allowed based on the lack of concrete evidence supporting the allegations against the appellant.