2016 (9) TMI 36 - AT - Central Excise

Tribunal Overturns Penalties and Demands Due to Lack of Evidence

The tribunal set aside the demands totaling various amounts due to lack of corroborative evidence and proper investigation. Penalties imposed on ... Demand of duty and imposition of penalty - clandestine removal of goods - received 238 triplicate and quadruplicate copies of invoices used by the Appellant firm to remove goods without payment of duty - no further investigation appears to have been conducted - Held that:- we find that in spite of possession of 238 invoices, no investigation was conducted to ascertain the veracity of those invoices. We further find that the department has not disclosed the source of such invoices. It is not forthcoming on record as to whether such invoices were seized from the buyers or from the possession of any employee or director or from the office/ factory of the Appellant. Even if the invoices were received by the department, the officers could have conducted investigation from the buyers of the goods or the transporters as number of transport vehicles were appearing in invoices, but no investigation was conducted. Only on the basis of statement of Shri Sukumar Ghosh, who had stated that it indicates removal of goods, duty liability cannot be fastened against the Appellant's firm. The preparation of 238 invoices at the utmost can create a doubt that the goods have been removed under the cover of such invoices, however the same has to be corroborated by conduction of further investigation from the buyers/ transporter and other persons involved. In absence of any such investigation, demand cannot be substantiated against the appellant. In case of demand of ₹ 96,27,789/-, the same has arisen on the sole basis of statement of Shri Nizzamuddin Sheikh who has stated that the production of Sponge Iron was 1600 MT per month. We find that his statement is not supported by any evidence. No documents in the form of his production register or wage record or any production report are available on record for substantiating his statement. Once Shri Sukumar Ghosh in his statement dated 27.05.2008 had stated that his earlier statements were based upon records shown to him, the investigation officers should have brought on record of clearance of goods from the factory of Appellant firm with enquiries from buyers, transporters and the employees/ persons connected with the case. No such evidences or statements have been brought on record. In such case, we are of the view that demand cannot be made on the basis of statement of Shri Sukumar Ghosh or Shri Nizammuddin Sheikh. Also in case of demand based upon statement of Shri Nizzamuddin Sheikh, we find that apart from his statement no other documentary evidences are available on record. We, therefore hold that the demand of ₹ 95,28,055/- and of ₹ 96,29,789/- are not sustainable. In case of demand of 34,86,045/- on the basis of Process Department Log Book and Shift Log Sheet, the demand has been made on the basis of alleged consumption of raw material. We find that Shri Sukumar Ghosh and the Directors of the Appellant firm have pleaded ignorance about such documents. No identification of person who has prepared said documents has been done. In absence of scribe of such documents, the investigation does not lead to inference of having goods produced in the Appellant's Factory. No evidence of Appellant firm having procured the unaccounted raw material has come to the light. Nevertheless, we find that on the basis of such documents showing consumption of raw material, it cannot be said that the goods have been manufactured and cleared by the Appellant. We, thus hold that the duty demand is not sustainable in view of various judgments. Demand of ₹ 13,10,287/- and ₹ 2,58,764/- - on the basis of Despatch Advice and slip pad. Shri Sukumar Ghosh in his statement dated 27.05.2008 denied any knowledge about such papers. The adjudicating authority in his order has only held that the charges are established on the basis of documents. We find that no discussion has been done as to how the said records lead to inference of removal of goods. In absence of buyers of goods, transportation thereof and receipt of consideration, the charges of clandestine removal cannot be established. No effort has been undertaken to identify the author of said dispatch advice and slips pad. Thus, the demands cannot be made. Therefore, the demands are not sustainable. A demand of ₹ 14,94, 236/- has been confirmed against the Appellant firm on shortages of MS Ingots found during physical verification on 14.02.2007. We find that the denial of cross examination of Shri Sukumar Ghosh who was present at the time of physical verification has been wrongly denied. That they have been recording the production on estimation basis which has led to such shortages. That since there are no corroborative evidence of removal of goods, therefore demand is not sustainable. We find that except shortage, no other evidence has been brought on record concerning the removal of goods. The shortages of goods may lead to an inference of removal of goods without payment of duty and a starting point of investigation. However, no further investigation has been conducted to ascertain the material fact of removal of goods. Since there is no buyer of goods and no investigation on removal of goods, in such a case we hold that duty demand is not sustainable merely on the basis of shortages of goods. Hence, the impugned order is not sustainable and are set aside. Since we have held that there is no sustainable demand, consequential penalties on Shri Sukumar Ghosh and Shri Iqbal Razzak Hingora are also set aside. - Decided in favour of appellant with consequential relief Issues Involved:1. Demand of Rs. 95,28,055/- based on parallel invoices.2. Demand of Rs. 96,29,789/- based on the statement of the labour contractor.3. Demand of Rs. 34,86,045/- based on Process Department Log Book and Shift Log Sheet.4. Demand of Rs. 13,10,287/- and Rs. 2,58,764/- based on Dispatch Advice and slip pad.5. Demand of Rs. 14,94,236/- based on the shortage of MS Ingots.Detailed Analysis:1. Demand of Rs. 95,28,055/- Based on Parallel Invoices:The revenue alleged that M/s Shivalaya Ispat & Power Pvt. Ltd. removed goods without payment of duty using 238 copies of parallel invoices. However, the tribunal found that the revenue did not conduct further investigation to corroborate the removal of goods with these invoices. The source of the invoices was not disclosed, and no investigation was conducted from the buyers or transporters mentioned in the invoices. The tribunal held that the preparation of invoices alone could not substantiate the demand without further corroborative evidence. The reliance on the statement of Shri Sukumar Ghosh, who indicated the removal of goods based on documents shown to him, was insufficient without cross-examination and further investigation.2. Demand of Rs. 96,29,789/- Based on the Statement of the Labour Contractor:The demand was based on the statement of Shri Nizzamuddin Sheikh, who claimed that the monthly production of Sponge Iron was 1600 MT. The tribunal found that his statement was not supported by any documentary evidence, such as production registers or wage records. The cross-examination of Shri Nizzamuddin Sheikh was denied, which the tribunal found incorrect. The tribunal held that the demand could not be substantiated solely based on his statement without further corroborative evidence.3. Demand of Rs. 34,86,045/- Based on Process Department Log Book and Shift Log Sheet:The demand was based on alleged raw material consumption shown in the Process Department Log Book and Shift Log Sheet. The tribunal found that the documents were not authenticated, and the persons who prepared them were not identified. The directors and Shri Sukumar Ghosh denied knowledge of these documents. The tribunal held that the demand could not be substantiated without identifying the scribe and proving the production and removal of goods based on these documents.4. Demand of Rs. 13,10,287/- and Rs. 2,58,764/- Based on Dispatch Advice and Slip Pad:The demand was based on private records, such as Dispatch Advice and slip pad. The tribunal found that there was no author or scribe identified for these documents. The adjudicating authority did not provide a detailed discussion on how these documents led to the inference of removal of goods. The tribunal held that the demand could not be substantiated without identifying the author and proving the removal and transportation of goods.5. Demand of Rs. 14,94,236/- Based on the Shortage of MS Ingots:The demand was based on the shortage of MS Ingots found during physical verification. The appellant contended that the shortage was due to estimation and not actual weighment. The tribunal found that no further investigation was conducted to prove the removal of goods. The tribunal held that the demand could not be substantiated merely based on the shortage without further corroborative evidence of removal.Conclusion:The tribunal set aside the impugned order, holding that the demands were not sustainable due to the lack of corroborative evidence and proper investigation. Consequently, the penalties imposed on Shri Sukumar Ghosh and Shri Iqbal Razzak Hingora were also set aside. The appeals were allowed with consequential relief.