2017 (4) TMI 321 - AT - Central Excise

Tribunal overturns duty evasion allegations due to lack of evidence

Super Cassettes Industries Ltd. Versus Commissioner of C. Ex., Noida

The Tribunal set aside the Order-in-Original in a case involving allegations of clandestine clearances of dutiable goods without payment of duty. The ... Clandestine removal - appellant case is that the SCN was based on the presumption about the figures mentioned on the loose sheets to be one hundredth of the actual transactions value and also about the numbers mentioned on the slips to be connected to their dealers with whom they have regular transaction of duty paid and exempted goods - Revenue's claim was that the figures on the loose sheets were related to cash transactions of clandestine clearances of dutiable goods - validity of SCN - Held that: - in none of the statements there was any admission that the data recorded on the loose sheets, was related to the value of the goods cleared clandestinely. There is force in the argument of the learned Counsel for the appellants that department did not compare the data with the data related to clearances of goods on which duty was paid and the goods manufactured by them which did not attract duty. We, therefore, find that the show cause notice is based on presumption. Therefore, subject of SCN dated 13-8-2004 is not sustainable - appeal allowed - decided in favor of appellant. Issues:1. Allegation of clandestine clearances of dutiable goods without payment of duty.2. Validity of demand based on numerical figures in loose papers.3. Lack of details provided by the department regarding goods manufactured.4. Absence of evidence supporting allegations of clandestine manufacture and sale of goods.5. Assessment of demand based on presumption and assumptions.6. Sustainability of major demand in the unit for goods exempt from Central Excise duty.7. Failure to meet legal requirements for evidence of procurement, labor, electricity consumption, etc.8. Lack of corroborative evidence from buyers and transporters.9. Absence of direct material evidence supporting allegations.10. Incorrect assessment of shortage/excess in physical stock taking.11. Ignoring statements of dealers denying clandestine purchase of goods.12. Lack of corroborative statements from dealers regarding entries in diary/loose papers.Analysis:1. The case involved allegations of clandestine clearances of dutiable goods without payment of duty based on loose papers found during a search. The Original Authority confirmed the demand and imposed penalties on the company and individuals. The appellants challenged the findings, arguing that the department's demand was based on imaginary grounds, presumption, and lack of concrete evidence linking the loose papers to clandestine activities. The Tribunal noted the absence of admissions or corroborative evidence supporting the department's claims, ultimately setting aside the Order-in-Original and allowing the appeals.2. The validity of the demand was questioned by the appellants, highlighting the lack of details provided by the department regarding the goods manufactured. They argued that the demand was based on presumption and assumptions without concrete evidence linking the numerical figures in the loose papers to clandestine activities. The Tribunal agreed with the appellants, emphasizing the department's failure to compare the data with duty-paid goods and goods exempt from duty, leading to the conclusion that the show cause notice was not sustainable in law.3. The appellants raised concerns about the sustainability of the major demand in the unit, primarily manufacturing goods exempt from Central Excise duty. They argued that the demand was not justified, especially considering the nature of the goods produced. The Tribunal did not specifically address this issue in the detailed analysis but set aside the Order-in-Original based on the lack of concrete evidence and unsustainable presumption.4. Legal requirements for evidence of procurement, labor, electricity consumption, and other aspects related to manufacturing and sale of goods were highlighted by the appellants. They contended that the department failed to meet these requirements, leading to unsustainable allegations of clandestine activities. The Tribunal did not delve deeply into this issue in the detailed analysis but ultimately set aside the Order-in-Original due to the lack of concrete evidence and reliance on presumption.5. The absence of corroborative evidence from buyers and transporters, as well as the lack of direct material evidence supporting the allegations, was a key argument raised by the appellants. They emphasized the importance of concrete evidence to substantiate claims of clandestine activities. While the Tribunal did not address this issue specifically in the detailed analysis, the decision to set aside the Order-in-Original indicates a lack of sufficient evidence to support the department's claims.