2014 (5) TMI 606 - HC - Central Excise

Tribunal Decision Upheld Rejecting Rs. 1.85 Crore Excise Demand Without Corroborative Evidence Under Relevant Tax Rules

The HC upheld the Tribunal's decision rejecting the demand of Rs. 1.85 Crores for clandestine removal of excisable goods due to lack of positive evidence. ... Clandestine removal – retraction of statements - Demand on the note books and pen-drive recovered from the premises of third party, who was a dealer of assessee – Lack of evidence - Whether the Customs, Excise & Service Tax Appellate Tribunal, was correct in holding that evidences collected by Departments are admissible evidences only for one offence while the same set of evidences only for one offence while the same set of evidence are insufficient to establish another offense - Held that:- in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. All the appeals are based predominantly and essentially on factual matrix. The Tribunal elaborately and very correctly dealt with the details furnished by both the sides and rightly not sustained the demand of ₹ 1.85 Crores, which had no evidences to bank upon. Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax, much less the retracted statements. To the extent there existed substantiating material, Tribunal has sustained the levy. No perversity could be pointed out in the approach and treatment to the facts - No substantial question of law arises - Decided against Revenue. 1. ISSUES: 1. Whether the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) was correct in holding that there is no evidence of illicit clearance despite suspicion and proof of modus operandi on a sample basis.2. Whether the CESTAT was correct in holding that evidences admissible for one offence are insufficient to establish another offence when based on the same set of evidence.3. Whether the CESTAT was correct in admitting evidences for past clearances while ignoring evidences for remaining clearances.4. Whether the CESTAT was correct in holding that a statement was retracted despite subsequent admissions of the deposition made in the retracted statement. 2. RULINGS / HOLDINGS: 1. The CESTAT correctly held that there is no evidence of illicit clearance despite suspicion and proof of modus operandi on a sample basis, as 'in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion.' The Tribunal found no material such as excessive raw material purchase, shortage of finished goods, or excess power consumption to support the demand.2. The CESTAT properly ruled that evidences admissible for one offence may be insufficient to establish another offence when based on the same evidence, particularly where confessional statements were retracted and no cogent evidence supported the demand.3. The CESTAT was justified in admitting evidences relating to past clearances and ignoring others where the evidences for the latter were lacking or not substantiated by independent corroboration.4. The CESTAT rightly held that statements retracted shortly after recording cannot be relied upon, especially when cross-examination was not permitted and subsequent statements admitted the deposition made in the retracted statements. 3. RATIONALE: The Court applied the legal principle that 'confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax,' emphasizing the necessity of positive and corroborative evidence in cases of clandestine removal of excisable goods. The Tribunal's approach relied on the absence of material indicia such as excessive raw material purchase or shortage of finished goods, and the importance of cross-examination to test the veracity of statements. The decision reflects adherence to established evidentiary standards under the Central Excise Act and rejects reliance on retracted statements without corroboration. No substantial question of law was found, and no doctrinal shift or dissent was indicated.