Excise demand under Section 11A invalid without corroboration to retracted Section 14 statement and stock verification

HC dismissed the revenue's appeal, upholding orders of the adjudicating authority and appellate forums that set aside the excise duty demand under Section 11A. HC held that the sole basis for alleging clandestine removal and stock shortage was the assessee's statement recorded under Section 14, which had been retracted, and that no physical stock verification was carried out as shown by the director's affidavit. In the absence of corroborative evidence or perversity in concurrent factual findings, no substantial question of law arose, and the demand could not be sustained.

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Issues:
1. Interpretation of Section 14 of the Central Excise Act regarding the need for further corroborative evidence in cases of admitted illicit removal of excisable goods.
2. Justifiability of dropping the demand for Central excise duty based on the evidence presented.
3. Requirement of corroborative evidence to establish clandestine removal of goods and evasion of Central Excise duty.

Issue 1:
The appeal under Section 35G of the Central Excise Act challenged the Tribunal's order regarding the interpretation of Section 14 of the Act. The appellant contended that once admission of illicit and clandestine removal of excisable goods was made under Section 14, no further corroborative evidence was necessary. However, the Tribunal's decision raised questions about the need for additional evidence to support such admissions.

Issue 2:
The case involved a search of a factory premises leading to the detection of a shortage of processed fabrics, indicating possible clandestine removal of goods. The appellant argued that the admission of clandestine removal in the statement recorded under Section 14 should have been sufficient to demand Central excise duty. Despite the admission, the adjudicating authority dropped the duty demand, a decision upheld by the Commissioner (Appeals) and the Tribunal.

Issue 3:
The Tribunal, along with the lower authorities, found that apart from the retracted statement of the company's director, there was no corroborative evidence supporting the charge of clandestine removal of goods. The director's retraction raised doubts about the reliability of the initial admission. The authorities emphasized the need for tangible, concrete evidence to establish clandestine removal, which was lacking in this case. The absence of corroborative material led to the dismissal of the appeal, as no substantial question of law was identified to warrant interference with the concurrent findings of fact.

In conclusion, the judgment highlighted the importance of corroborative evidence in cases of clandestine removal of goods for establishing liability under the Central Excise Act. The decision emphasized the significance of tangible proof beyond mere admissions, especially when initial statements are retracted. The dismissal of the appeal underscored the requirement for substantial legal questions to challenge lower authorities' findings based on the evidence presented.

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