2021 (12) TMI 958 - AT - Central Excise

Clandestine removal - rolled products i.e. MS Angles, MS Channels, MS Plates, MS Rods etc. classifiable under Chapter 72 of the Central Excise Tariff Act - issue of question of fact - HELD THAT In the instant case, the entire case of the Revenue is based on the Kaccha Chithas seized from the residence of the Director. The manner in which the said Kaccha Chithas is seized has been strongly agitated by the Appellant. The said Kaccha Chithas/documents should have been seized in the presence of the Director. There is considerable force in the contention of the Appellant that the Kacha Chithas relied upon by the Revenue cannot be a basis to uphold the serious charge of clandestine clearance. It is settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing concrete and cogent evidence. In the absence of corroborative evidence, the issue of fact i.e. in the present case the charge of clandestine clearance cannot be leveled against the assessee. In the entire proceedings, no evidence, much less corroborative evidence, has been adduced to show that input goods hae been procured to manufacture goods for clandestine clearance. No efforts have been made by the investigating agencies to establish the existence of any unaccounted manufacturing activity in the form of unaccounted raw material, shortage of stock, shortage of raw material/finished goods, excess consumption of electricity, unaccounted labour payments, interrogation of buyers/transporters or any incriminating record/document to suggest any flow back of cash etc. The Revenue authorities in this case have failed to discharge the burden of proving the serious charge of clandestine clearance or undervaluation with cogent and clinching evidence. It has been consistently held that no demand of clandestine manufacture and clearance can be confirmed purely on assumptions and presumptions and the same is required to be proved by the Revenue by direct, affirmative and incontrovertible evidence. The learned Commissioner made a fundamental error by making assumptions only just to confirm the demand on the allegation of clandestine clearance. It is a well settled position of law that serious allegation cannot be made merely on assumptions and presumptions and in the absence of detailed supporting evidence, the charge of clandestine removal cannot be upheld. Appeal allowed - decided in favor of appellant.

Issues:
1. Allegation of clandestine production and removal of finished goods without payment of Central Excise duty.
2. Seizure of Indian currency and confiscation under the Customs Act, 1962.
3. Reliability and admissibility of evidence - Kacha Chithas.
4. Burden of proof on Revenue for clandestine activities.
5. Lack of corroborative tangible evidence to support charges.
6. Legality of demand based on assumptions and presumptions.

Analysis:

1. The case involved an appeal by the assessee against the Order-in-Original confirming a demand of Central Excise duty, interest, and penalty for alleged clandestine production and removal of finished goods without payment of duty. The appellant, engaged in manufacturing rolled products, was accused of utilizing unaccounted raw material and clearing finished goods clandestinely. The Commissioner's findings were challenged by the appellant before the Tribunal.

2. The appellant contended that the evidence, particularly the Kacha Chithas, was unreliable as they were not seized in the presence of the Director and lacked corroborative tangible evidence. The appellant argued that serious charges of clandestine activities must be proven with concrete evidence, which was absent in this case.

3. The Tribunal emphasized the necessity of tangible, direct, and incontrovertible evidence to prove clandestine activities, including procurement of raw material, manufacturing process, and removal of goods. The reliance solely on the Kacha Chithas seized from the Director's residence was deemed insufficient to uphold the charge of clandestine clearance without corroborative evidence.

4. The Tribunal noted the absence of concrete evidence to establish unaccounted manufacturing activities, shortage of stock, or other incriminating records. It highlighted that the burden of proving clandestine activities rested on the Revenue, and in this case, no such evidence was presented to substantiate the serious charges.

5. The Tribunal concluded that the demand based on assumptions and presumptions, without tangible corroborative evidence, was unsustainable. The Commissioner's decision to confirm the demand solely on the basis of the Kacha Chithas and Director's statement was deemed erroneous. The lack of detailed supporting evidence led to the setting aside of the impugned order and the allowance of the appeal.

6. In summary, the Tribunal found the Revenue's case lacking in concrete evidence to support the allegations of clandestine activities. The reliance on vague material and absence of corroborative tangible evidence rendered the demand unsustainable, leading to the allowance of the appeal and setting aside of the impugned order.

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