2017 (12) TMI 1081 - AT - Central Excise

Tribunal overturns penalty based on presumptions without evidence, cites precedents

The Tribunal allowed the appeal, setting aside the penalty imposed on the appellant. The Tribunal found that the allegations were based on presumptions ... Penalty under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002 - clandestine removal / evasion of excisable goods - retracted confessional statement - requirement of corroborative and tangible evidence for establishing clandestine removals and for relying on confessionsPenalty under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002 - clandestine removal / evasion of excisable goods - retracted confessional statement - requirement of corroborative and tangible evidence for establishing clandestine removals and for relying on confessions - Validity of imposition of penalty of Rs. 50,000/- on the appellant for alleged involvement in clandestine sale of pig iron and bogus purchases of MS ingots. - HELD THAT: - The Tribunal examined whether the penalty could be sustained on the material on record. The Department's case rested on alleged clandestine removals and on a statement made by the appellant; however the investigating officers failed to identify any purchaser to whom the appellant sold pig iron and the allegation of consignments being diverted was treated as presumptive. The appellant had retracted the statement recorded earlier and the Tribunal held that a retracted confession cannot be given weight for imposing penalty unless corroborated. The Tribunal further observed that it was incumbent on the Revenue to investigate and produce tangible evidence - such as specific instances of clandestine removals, corroborative documentary proof or other material particulars - before levying penal consequences. In the absence of such corroboration and with the clandestine-sale allegations being presumptive, the imposition of penalty could not be sustained. [Paras 8, 9]Penalty of Rs. 50,000/- imposed on the appellant is set aside.Final Conclusion: The appeal is allowed to the extent that the penalty imposed on the appellant is quashed; the impugned order is set aside insofar as it levied the penalty against the present appellant. Issues Involved:1. Alleged contravention of Central Excise Act and Rules.2. Alleged clandestine removal and sale of pig iron.3. Validity of the appellant's transactions and invoices.4. Imposition of penalty under Rule 209A/26 of Central Excise Rules.5. Reliance on confessional statements.6. Invocation of the extended period of limitation.Issue-wise Detailed Analysis:1. Alleged Contravention of Central Excise Act and Rules:The Department alleged that the appellant contravened the provisions of the Central Excise Act and Rule 209A of Central Excise Rules, 1944, read with Rule 26 of Central Excise Rules, 2002. The appellant was accused of being instrumental in selling pig iron at Agra, which was consigned to M/s Venus Casting Pvt. Ltd./Venus Loha Udyog Ltd., and returning the amount to these entities for bogus purchases of MS Ingots.2. Alleged Clandestine Removal and Sale of Pig Iron:The Department's investigation suggested that M/s Venus Casting Pvt. Ltd., M/s Venus Loha Udyog Ltd., and M/s Venus Enterprises were involved in evading Central Excise duty by manufacturing and clandestinely removing MS Ingots without payment of duty. The appellant was accused of facilitating this by selling pig iron at Agra and returning the sale proceeds under the guise of bogus purchases of MS Ingots.3. Validity of the Appellant's Transactions and Invoices:The appellant contested the show cause notice, arguing that there was no evidence of M/s Apparent Iron & Steel, Goa, consigning pig iron to M/s Venus Loha Udyog Ltd. through the appellant. The appellant claimed to have received consignments of MS Ingots under proper central excise invoices and made payments through bank cheques. The appellant argued that the invoices were statutory documents showing payment of duty and could not be rejected without evidence.4. Imposition of Penalty under Rule 209A/26 of Central Excise Rules:The learned Commissioner imposed a penalty of Rs. 50,000 on the appellant, concluding that the appellant was involved in selling pig iron at Agra and returning the sale proceeds to M/s Venus Loha Udyog Ltd. through bogus purchases of MS Ingots. The Commissioner relied on the appellant's confessional statement, despite its retraction, and held that the appellant's contention lacked force.5. Reliance on Confessional Statements:The appellant argued that confessional statements, unless corroborated by other evidence, could not be relied upon. The appellant cited various judgments supporting this view. The learned Commissioner, however, did not agree and relied on the appellant's confessional statement, despite its retraction, to impose the penalty.6. Invocation of the Extended Period of Limitation:The Department invoked the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944. The appellant contested this, arguing that the Department failed to produce any evidence showing an intention to evade payment of duty.Judgment:The Tribunal considered the rival contentions and found that the appellant had provided particulars of genuine transactions. The allegation of clandestine sale of pig iron was deemed presumptive, as the investigating officers did not provide any specific instances or names of parties to whom pig iron was sold. The Tribunal noted that the appellant had retracted his confessional statement and that such statements could not form the basis for imposing a penalty. The Tribunal relied on precedents that held confessional statements, especially retracted ones, could not be the sole basis for levying excise duty or penalties. Consequently, the appeal was allowed, and the impugned order imposing a penalty on the appellant was set aside.Conclusion:The Tribunal concluded that the allegations against the appellant were based on presumptions and lacked concrete evidence. The retracted confessional statement could not be relied upon to impose a penalty. The appeal was allowed, and the penalty imposed on the appellant was set aside.