2024 (11) TMI 1220 - AT - Central Excise

Clandestine manufacture and removal - substantial electricity consumption - no other corroborative evidences - Revenue faied to rebut the claims made by the appellant - penalty imposed on the Director Mahabir Prasad Rungta - HELD THAT - Since the search had commenced suddenly without any notice, there would be no chance for the appellant to hide these factual evidences. But no evidence towards stock of raw materials, consumables, in-process stock or finished goods stocks have been found or recorded in the Panchanama. The panchnama nowhere indicates anything to suggest that manufacturing activities were noticed by the investigating team at the time of their surprise visit. Even in the six trucks loaded with materials, while it is being claimed by Revenue that they are finished goods by nature, the appellants have countered the same stating that these trucks were carrying scrap arising out of Kilns being fabricated and installed in the factory. Coming to the evidence on account of the data of sales said to be obtained from the CPU and based on the emails forensically inspected , there is no clarity as to when the CPU was seized, and if seized, whether Panchanama was prepared towards the same is not coming out anywhere - The date of signing and date of printing gives raise to serious doubt towards the very veracity of the Revenue s claim. Added to this is the fact is the issue of retraction of the initially recorded statement of the officers of the appellant. The Electricity consumption used for arriving at the clandestine manufacture has been countered by the appellant to make their submission that since Kilns were being fabricated and installed in the factory premises, the electricity was being used. The Dept has not come out with any detailed analysis to negate the claim of the appellant. The proceedings are purely based on presumptions and assumptions without proper back up corroborative evidence. The issues raised by the Revenue have been answered satisfactorily by the appellant, thereby shifting the onus to prove the clandestine manufacture / clearance on to the Revenue. But neither corroborative evidence, nor any counterpoint have been brought in by the Revenue to fortify their claim - Appeal allowed on merits. Penalty on Director Mahabir Prasad Rungta - HELD THAT - Since the confirmed demand is not sustainable against the main appellant Shriram Power Steel Pvt. Ltd., on merits the penalty imposed on the Director Mahabir Prasad Rungta also does not legally sustain. Accordingly, the penalty imposed on him is set aside. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:

1. Allegation of clandestine manufacturing and clearance of goods by the appellant.
2. Validity of evidence and procedures followed by the Revenue.
3. Justification for the extended period for issuing the Show Cause Notice.
4. Imposition of penalties on the appellant and its director.

Detailed Analysis:

1. Allegation of Clandestine Manufacturing and Clearance:

The central issue revolves around the Revenue's allegation that the appellant continued manufacturing and clearing goods clandestinely despite declaring the closure of their unit on 06.07.2016. The investigation, initiated based on a complaint, led to the discovery of six trucks loaded with materials on 20.03.2017, which the Revenue claimed were finished goods ready for dispatch. However, the appellant contested this, asserting that the trucks contained scrap from kiln fabrication and installation activities. The Tribunal noted a lack of tangible evidence, such as raw materials or finished goods, during the search operation, which would typically be present if manufacturing was ongoing. The Tribunal emphasized the absence of corroborative evidence, such as records of raw material procurement, movement of goods, or statements from buyers, which are essential to substantiate claims of clandestine operations.

2. Validity of Evidence and Procedures:

The appellant challenged the evidentiary value of the documents presented by the Revenue, highlighting procedural lapses such as the seizure of the CPU without a proper seizure memo and discrepancies in the dates of document printing and signing. The Tribunal observed that the Revenue heavily relied on data from the CPU and emails, which were contested by the appellant. The Tribunal found the Revenue's evidence insufficient, as it primarily rested on assumptions and lacked corroborative proof of clandestine manufacture and clearance, such as excess raw materials, unaccounted finished goods, or transportation records.

3. Justification for Extended Period for Issuing the Show Cause Notice:

The Tribunal scrutinized the delay in issuing the Show Cause Notice, which was served on 26.03.2021, despite the investigation and forensic report being completed by 2018. The Tribunal noted that the Revenue failed to gather further evidence during this period to substantiate its claims. Citing precedents, the Tribunal held that such a delay renders the demand time-barred, as the Revenue did not take concrete steps to fortify its case within a reasonable timeframe.

4. Imposition of Penalties:

Given the lack of substantial evidence to support the Revenue's allegations, the Tribunal set aside the penalties imposed on the appellant and its director. The Tribunal concluded that the proceedings were based on presumptions without proper corroborative evidence, thereby shifting the burden of proof back to the Revenue, which it failed to discharge.

Conclusion:

The Tribunal allowed the appeal on merits, setting aside the impugned order and penalties due to the Revenue's failure to provide substantial evidence of clandestine manufacturing and clearance. The Tribunal emphasized the necessity of tangible evidence and corroborative support in cases of alleged clandestine activities, which were lacking in this instance. Consequently, the appeals were allowed, with consequential relief as per law.