2022 (4) TMI 757 - AT - Customs

100% EOU - Clandestine removal - illicit clearance of imported yarn and indigenous Yarn - detection of shortages at the time of the visit of the officers - recovery of Kachha Delivery Challans from the premises of Appellant - presence of corroborative evidences or not - demand based on assumptions and presumptions - HELD THAT - It is settled law that though the admission is extremely important piece of evidence it cannot be said to be conclusive and it is open to the person who has made the admission to show that this is incorrect. It is also noted that there are numerous decisions of the Tribunal laying down that such admission of shortages without there being any admission of clandestine removal, cannot be considered to be conclusive evidence to establish the guilt of the assessee. Burden of proof is on the Revenue and is required to be discharged effectively. Clandestine removal cannot be presumed merely because there was shortages of the stock or on the basis of statement of person only - Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH VERSUS LAXMI ENGG. WORKS 2001 (8) TMI 162 - CEGAT, NEW DELHI has held that there being no corroborating evidence in the form of receipt of raw materials or sale of final products to each buyers, the allegations of clandestine removal cannot be upheld. The department apart from the Kachcha Delivery Challan seized from the Appellant s premises and statement of partner and supervisor has not been able to give any independent evidence which can corroborate the charges. No statement of alleged buyers to whom the impugned goods were cleared recorded by the department. The Appellant has placed reliance upon various judgments to canvas their point that in absence of corroborative evidence no demand can be made - it is also found that apart from the alleged shortages, there is virtually no other evidence on record to reflect upon the clandestine activities of the appellant. As per the settled law such shortages, by themselves, cannot lead to the fact of clandestine removals so as to justify confirmation of demands. The entire case of the Revenue is based upon the surmises and conjectures. No concretes positive and tangible evidence appears on record. The evidences brought into the record by the department are incomplete, inconsistent and not a reliable piece of evidence to prove charges of clandestine removal. The demand of duty along with interest and imposition of penalties as well as confiscation and imposition of redemption fine on the raw materials and the finished goods are not sustainable. Penalties imposed on partner of Appellant s firm - HELD THAT - The demand itself is not sustainable against the main Appellant, hence the question of penalties on partner of Appellant s firm does not arise. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Timeliness and proper service of the show cause notice.
2. Admissibility and reliability of evidence, particularly statements and documents.
3. Allegations of clandestine removal of goods and the associated demands for duties and penalties.
4. Confiscation and redemption fines on raw materials and finished goods.
5. Imposition of penalties on individuals associated with the appellant firm.

Detailed Analysis:

1. Timeliness and Proper Service of the Show Cause Notice:
The appellant argued that the show cause notice dated 31.03.2008 was not served within the limitation period as required by Section 37C(1)(a) of the Central Excise Act, 1944, and Section 153(1)(a) of the Customs Act, 1962. The notice was allegedly received only in March 2014, beyond the extended limitation period of five years. The Tribunal had previously held that the notice should have been served at the changed address provided by the appellant. The failure to serve the notice within the prescribed period rendered the demands barred by time, making the entire impugned Order-In-Original liable to be set aside.

2. Admissibility and Reliability of Evidence:
The appellant contended that the findings of illicit clearances were based on inadmissible statements and documents. The statements of the appellant’s supervisor and partner, and the kachcha delivery challans, were not admissible as evidence since the individuals were not examined during adjudication as required by Section 138B of the Customs Act, 1962, and Section 9D of the Central Excise Act, 1944. The Tribunal emphasized the necessity of corroborative evidence to substantiate the allegations, which was lacking in this case. The reliance on uncorroborated statements and documents without examination and cross-examination was deemed insufficient to uphold the charges.

3. Allegations of Clandestine Removal of Goods:
The Tribunal found that the department's case was primarily based on shortages detected during the officers' visit and kachcha delivery challans. However, there was no corroborative evidence such as statements from buyers, transporters, or proof of payment. The Tribunal reiterated that mere shortages and statements without independent evidence could not establish clandestine removal. The burden of proof lay with the Revenue, which failed to discharge it effectively. The Tribunal cited several precedents emphasizing the need for concrete evidence to prove clandestine removal, which was absent in this case.

4. Confiscation and Redemption Fines:
The Tribunal noted that the appellant had produced re-warehousing certificates for the goods cleared under CT-3 certificates to M/s Uma Textiles Processors, and there was no allegation that these certificates were fake. The description "Polyester Grey Fabrics" was considered generic enough to include "Polyester Knitted Grey Fabrics." The Tribunal found no evidence of illicit clearance in the domestic market or purchase of goods from the market to fulfill export obligations. The confiscation and redemption fines imposed on the raw materials and finished goods were deemed unsustainable due to the lack of corroborative evidence.

5. Imposition of Penalties on Individuals:
Given that the demand against the main appellant was not sustainable, the penalties imposed on the partner of the appellant’s firm were also set aside. The Tribunal held that the penalties could not stand when the primary demand itself was not justified.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief to the appellants. The decision emphasized the necessity of timely service of notices, the requirement for corroborative evidence in cases of clandestine removal, and the proper examination and cross-examination of statements used as evidence. The confiscation and penalties were found to be unjustified in the absence of concrete evidence.

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