2015 (8) TMI 739 - SC - Central Excise

Supreme Court quashes tax demands for lack of evidence, stresses fair assessment

The Supreme Court allowed the appeal, quashing the demands raised by the authorities, as the allegations of clandestine removal were not substantiated. ... Clandestine removal of goods - Seizure of unaccounted goods - Confessional statements - Held that:- from the reading of the statements of Mr. Deepak Das and Mr. J. C. Mansukhani that this aspect is explained in abundance by them in their statements. After reading the statement of these two persons, we find that no such admission was made by them, as recorded in the order of the CESTAT which is extracted above. Mr. Deepak Das had only stated that 'In export dies, catalogue weight should be always equal or 10% than the physical weight'. This is in reply to Question No. 4 which was put to Mr. Deepak Das. - Court fails to understand how it amounts to admission on the part of Mr. Das that the quantity disclosed was less. To the similar effect is the statement of Mr. Mansukhani which is treated as his admission. - there was no such admission on the part of these two persons which is erroneously read out to be so, entire basis of the impugned orders passed by the Commissioner as well as the CESTAT gets knocked off. - Department had taken only those samples of products with larger quantity and missed out those with lesser quantity and in case all the items are taken together, there would not be any difference in quantities. In spite of the fact that the aforesaid plea was specifically raised by the appellant in explaining that there was no difference in the quantities and thus, no question of any clandestine removal of the goods from the premises, the said plea has not been adverted to and there is no reference made to the aforesaid material produced by the appellant. It is stated at the cost of repetition, that only on the basis of so called admissions made by Mr. Mansukhani and Mr. Deepak Das, the authorities jumped to the conclusion without undertaking any further exercise. Such an order of the CESTAT which is confirmed by the High Court does not stand legal scrutiny and therefore, these orders are liable to be set aside. - Decided in favour of assessee. Issues Involved:1. Allegation of clandestine removal of finished goods.2. Invocation of extended period of limitation under Section 11A(1) of the Central Excise Act.3. Reliance on statements of employees for establishing clandestine removal.4. Consideration of explanations and evidence provided by the appellant.5. Legal scrutiny of findings by the adjudicating authority, CESTAT, and High Court.Detailed Analysis:1. Allegation of Clandestine Removal of Finished Goods:The Department alleged that the appellant clandestinely removed quantities of finished goods without payment of excise duty. This allegation was based on discrepancies found during a raid on the appellant's factory and subsequent investigations, including statements from employees and dealers. The appellant contested these allegations, arguing that the discrepancies were due to permissible variations in weight during manufacturing and not due to any clandestine removal.2. Invocation of Extended Period of Limitation:The Department issued a show cause notice invoking the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, citing evasion of duty and suppression of facts. The appellant argued against the invocation of the extended period, maintaining that there was no intentional evasion or suppression.3. Reliance on Statements of Employees:The CESTAT and the adjudicating authority heavily relied on the statements of two employees, Mr. Deepak Das and Mr. J.C. Mansukhani, to substantiate the allegations of clandestine removal. The appellant argued that these statements were misinterpreted and did not constitute admissions of clandestine removal. The Supreme Court found that the statements were misread and did not support the allegations.4. Consideration of Explanations and Evidence Provided by the Appellant:The appellant provided detailed explanations and technical literature to justify the weight discrepancies, citing permissible variations due to manufacturing processes. The appellant also demonstrated that the discrepancies were within acceptable limits and provided a chart to show that the overall weight of exported goods matched the invoiced quantities. The Supreme Court noted that these explanations were not adequately considered by the lower authorities.5. Legal Scrutiny of Findings by the Adjudicating Authority, CESTAT, and High Court:The Supreme Court scrutinized the findings of the adjudicating authority, CESTAT, and the High Court. It concluded that the findings were based on erroneous interpretations of the employees' statements and failed to consider the appellant's explanations and evidence. The Supreme Court found the orders of the lower authorities to be legally unsustainable and set them aside, quashing the demands raised by the Department.Conclusion:The Supreme Court allowed the appeal, quashing the demands raised by the authorities and finding that the allegations of clandestine removal were not substantiated by the evidence presented. The Court emphasized the importance of considering all explanations and evidence provided by the appellant and ensuring that findings are based on accurate interpretations of statements and facts.