2016 (11) TMI 407 - AT - Central Excise

Tribunal dismisses Revenue's appeal in clandestine manufacture case, citing lack of evidence and one-sided investigations

Commissioner of Central Excise, Raipur Versus M/s. Heliwal Polypackers Pvt Ltd.

The Tribunal upheld the Commissioner's decision to dismiss the Revenue's appeal in a case involving alleged clandestine manufacture and clearance of final ... Clandestine manufacture and removal of goods - HDPE /PPE bags - Held that : - It goes without saying that the onus to proof clandestine manufacture and removal of final product is placed heavily on the Revenue and is required to be discharged by production of sufficient, tangible and positive evidence. The allegation of clandestine removal cannot be upheld on the basis of mere entries made in certain private records recovered from the security gate of the factory. Revenue in their memo of appeal have not referred to any such evidence either coming from the raw material supplier or recipient of final product so as to come to a finding of clandestine removal. There is also nothing on record to show that the appellant had manufactured such a huge quantity of final product which stand cleared by them clandestinely - appeal dismissed - decided against Revenue. Issues: Alleged clandestine manufacture and clearance of final products, applicability of concessional rate of duty, sufficiency of evidence to prove clandestine removal.In this case, the respondents were engaged in manufacturing HDPE/PPE bags under Chapter 39 of the Central Excise Tariff, availing the benefit of concessional duty rate under a small scale notification. The preventive officer conducted checks at their factory, leading to allegations of clandestine manufacture and clearance of final products, resulting in a demand for duty payment and penalties. The Commissioner (Appeals) observed that the evidence collected, including a gate register and statements, was insufficient to uphold the charge of clandestine removal. The Commissioner set aside the original adjudicating authority's order based on lack of corroborative evidence from buyers, transporters, and raw material suppliers.The Appellate Tribunal noted that the Revenue's case heavily relied on the gate register and statements, lacking substantial corroborative evidence. The Tribunal agreed with the Commissioner that the investigations were one-sided and failed to establish the charge of clandestine removal conclusively. The Revenue failed to provide tangible evidence from raw material suppliers or recipients of final products to support their claim. The onus of proving clandestine manufacture and removal rests on the Revenue, requiring concrete evidence beyond mere entries in private records. As the Revenue did not present additional evidence during the appeal, the Tribunal upheld the Commissioner's decision to reject the Revenue's appeal.The Tribunal emphasized that the mere existence of entries in private records recovered from the factory's security gate was insufficient to prove clandestine removal. The lack of evidence showing a significant quantity of final products cleared clandestinely by the appellant further weakened the Revenue's case. The Tribunal highlighted the necessity for the Revenue to provide credible and verified evidence from various sources, such as buyers, transporters, and suppliers, to substantiate allegations of clandestine activities. Ultimately, due to the absence of substantial evidence beyond the gate register and statements, the Tribunal upheld the Commissioner's decision to dismiss the Revenue's appeal, emphasizing the importance of thorough investigations and corroborative evidence in such cases.